David Oxenford

By: David Oxenford, Wilkinson Barker Knauer

As we wrote in Sunday’s weekly summary of broadcast actions, last week was a very active one at the FCC.  The FCC released the texts of rulemaking proposals on annual regulatory fees and on new regulatory proposals for LPTV and TV translator stations.  The Commission also released orders reinstating rules prohibiting FM stations serving the same area from duplicating programming and rules imposing new verification requirements on broadcasters to assure that program time (and issue ads) that they sell are not purchased by representatives of foreign governments without enhanced public disclosures.  We plan to write more about these actions in the coming days.  Today, we will focus on a less publicized set of actions taken last week that remind broadcasters of a decade-old requirement to which not much attention has been paid since its adoption – the requirement that broadcasters not discriminate in the sale of advertising time and include in sales contracts statements informing their ad buyers of their polices against such discrimination.

The Media Bureau’s actions reminding broadcasters of the policy against advertising discrimination came in three orders released last week.  The  Bureau, in acting on pending television license renewal applications, admonished a Louisiana TV station, a South Carolina Class A TV station, and a North Carolina Class A station for their failures to include non-discrimination clauses in their advertising sales agreements.  In their renewal applications, none of the applicants was able to respond to a required certification attesting that “its advertising sales agreements do not discriminate on the basis of race or ethnicity and that all such agreements held by the licensee contain non-discrimination clauses.”  Either no explanation was given for not being able to certify or an exhibit was provided stating that the station had not routinely included this certification in their sales agreements.  While no monetary fines were imposed in connection with these warning letters, as no evidence of actual discrimination was shown, the Bureau warned that future failures to include non-discrimination clauses in such agreements could result in fines, and in the case of the Class A stations, a downgrade to LPTV status. With three such decisions in one week, it appears that the Bureau was sending a message to the industry to pay attention to this requirement.

This obligation was adopted in 2011 reflecting concerns about “no urban, no Spanish” dictates in advertising orders for general market products and services.  These dictates came from advertisers who did not want their products pitched to minority audiences, making stations serving such audiences harder to operate when portions of major advertising budgets were not available to them.  Prior to the adoption of the requirement, we wrote about a car advertiser who included such a dictate in a request for an advertising buy, an action that caused an uproar in the broadcast advertising world and perhaps led to the FCC’s adoption of the requirement.  When the Enforcement Bureau of the FCC in 2011 issued an Enforcement Advisory, answering questions about the new requirement, then-Chairman Genachowski issued an accompanying News Release, stating that the Commission “will vigorously enforce its rules against discrimination in advertising sales contracts.”  See our article here where we wrote about these actions at the time of these FCC releases.  Yet, until the actions this past week, there has been very little enforcement of the requirement.

The policy requires that stations have language in their sales contracts requiring that the buyer of advertising time certify that they were not buying the advertising time with a discriminatory intent The 2011 Enforcement Advisory also highlighted that stations that use advertising rep firms or other sales agents must make sure that these agents have nondiscrimination clauses in their own contracts used to sell advertising time on the station.

This policy initially raised several questions from broadcasters, with many asking what they should do if they have no advertising contracts.  At the time, many broadcasters, especially in dealing with regular customers, booked advertising through emails or phone calls – not formal contracts.  The lack of formal sales contracts has likely increased since that time as more and more programmatic sales platforms have been introduced into the ad buying process, so that there is not the formal advertising contract exchange between real people.  The FCC did not specifically address how stations with no advertising contracts should meet their obligations, but the industry seems to have settled on a practice of including the nondiscrimination clause in the exchanges that form the contract – e.g. the emails confirming the schedule, the rate cards offering the spots for sale, or other communications between the station and the advertiser.

We have also suggested that written contracts are a good idea when feasible, as these contracts can cover other issues that are important to broadcasters, e.g. indemnifications from advertisers that they have the rights to all the music and other creative content used in their ads, statements that the broadcaster reserves the right to preempt ads if they don’t like the content or if the broadcaster needs to run some programming of greater local importance, that advertising sold to one party should not be re-sold to anyone else, that the broadcaster is not liable for any consequential damages if an ad does not run for technical or other reasons, and similar issues.  These clauses are sometimes included in terms and conditions for advertising purchases or in other documents provided to advertisers or their agents – and any such disclosures should include the non-discrimination certifications.

What should the certification say?  Again, the FCC does not suggest any specific text.  The Commission seems to suggest that the contract certification should cover the fact that the broadcaster is not discriminating in the sale of time – when it probably is more accurate that, to insure that the advertising is not being purchased pursuant to a “no Urban, no Spanish” dictate, it should be the advertiser who is certifying that their motivation in buying time is not a discriminatory one.   We would expect that advertisers will have learned from that experience, and it will now be rare that advertisers will be so blatant about such an intention.  To discover such intent, broadcasters need to get a certification from the advertiser as to their intention.  In articles at the time, we suggested language which expresses the intent of both the advertiser and the station, but each station should carefully consider any language they adopt, and discuss it with their counsel.  As last week’s decisions make clear, it is important that stations routinely use such language in their sales materials.

The Enforcement Bureau Advisory also makes clear that broadcasters, in addition to simply making the required certification and including the required clause in their contracts, must also police advertising to make sure that it is not purchased for discriminatory purposes.  So, if some general market advertiser approaches a station with a request for an advertising schedule that seems to discriminate, the broadcaster needs to investigate if in fact there is a discriminatory intent, and reject such advertising if it in fact discriminates.  Broadcasters cannot turn a blind eye to potential discrimination in the purchase of advertising by their clients.

The current FCC has placed an emphasis on diversity and inclusion, assessing virtually every rule that it proposes or adopts to determine its impact on these important goals.  With last week’s actions, it appears to be making clear that it is also ready to enforce one of its policies directly addressing these goals.  Since it has been so long since this advertising nondiscrimination requirement was adopted, and as there has been little publicity about this requirement since its adoption (other than the certification in renewal applications), it is important to remember the obligation so that, come your next renewal, you will not be in the situation faced by these three stations cited by the Commission last week.

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.