David Oxenford

By: David Oxenford,
Wilkinson Barker Knauer LLP

Last week, the FCC entered into a consent decree with the operator of a low power TV station, where the broadcaster admitted to violating FCC rules by selling advertising packages that included guaranteed appearances of the advertiser on a local news and information program, without any notice to viewers that the programming was sponsored.  The decree imposed a 5-year compliance plan on the licensee, requiring the training of employees on sponsorship identification requirements of the FCC rules, the adoption of plans to ensure that the issue does not arise again, and the reporting to the FCC of any similar issues that arise in the future.  In addition, the licensee had to pay a $60,000 penalty – and the language of the decree suggests that this fine would have been significantly larger had the licensee been able to pay more (as it was, the licensee is allowed to pay off the penalty in $1000 per month increments). This penalty should not be a surprise, as the conduct raises significant sponsorship identification issues, as well as a host of issues under the FCC’s political broadcasting rules.

Having paid appearances in local programming without a sponsorship identification has in the past been a source of FCC concern – and has resulted in big penalties where a sponsor is not disclosed to the public.  For instance, we wrote here about a fine of more than $13 million imposed on Sinclair Broadcasting for running feature stories about a local cancer institute that had been promised to the institute as part of a paid advertising package, without disclosing the payment on-air.  Any time a broadcaster receives anything of value in exchange for saying something on the air, the broadcaster needs to disclose that consideration and who provided it.  Even program suppliers need to disclose that they have been paid when they have been paid to say something on the air.  For more information, see, for example our article here where a TV political commentator was required to disclose that he was being paid to support certain political positions, and our article here on requiring program syndicators to make clear when programming they provide has been sponsored.  The FCC’s recent rules about the disclosure of foreign government-sponsored programming (see our articles here and here) also require that broadcasters assure that any buyer of program time on the station has not itself been paid by a foreign government or their agent to say something in their programming.

Where the advertising is about political issues or controversial issues of public importance, the fines for failing to adequately disclose sponsorship information can be significant.  For instance, in 2016 the FCC imposed a $540,000 penalty on Cumulus Radio as part of a consent decree, for running ads supporting a hydro-electric project without a clear sponsorship identification.  While it was clear that the spots were advertising in favor of the project, they did not state the full name of the sponsoring entity, leading to the large fine (see our article here).  From these cases, it is clear that a sponsored news segment not labeled as such is a problem, but when that segment deals with candidates or political issues, the potential penalties are increased.  As noted in the LPTV consent decree, the “failure to provide sponsorship identification announcements for paid appearances by candidates on a show …. held out to the public as a bona fide news interview and public affairs program was particularly egregious because such failure had the potential to undermine the public’s confidence in the integrity of legitimate political discourse.”  Broadcasters should take to heart the footnote in last week’s consent decree that noted that the penalty imposed on this LPTV operator was calculated based on its inability to pay a larger fine – and likely would have been significantly higher had this infraction been committed by a more prosperous operator.

If these infractions had occurred at a larger full-power station, and during political windows, other political broadcasting issues would likely have been cited by the Commission.  The paid appearances in the morning program would have required public file disclosure and triggered equal opportunity obligations to opposing candidates (which probably could have been used by opposing candidates without the interview format sold to candidates by the station).  Lowest unit rate issues would also arise during a political rate window, as the station would have been obliged to break down the package price into its constituent parts, and that allocation may have affected advertising spot rates or the rates for program time purchased without the accompanying spot packages.  See our discussion of the impact of package prices on lowest unit rates, here.  Full-power stations should review their advertising packages to ensure that none would trigger these political rules and create new obligations to political advertisers.  While this broadcaster likely thought that it was creating a unique way to attract new advertising dollars to its station, in fact it stepped into a regulatory minefield that other broadcasters need to avoid.

David Oxenford is MAB’s Washington Legal Counsel and provides members with answers to their legal questions with the MAB Legal Hotline. Access information here. (Members only access). There are no additional costs for the call; the advice is free as part of your MAB membership.