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As the trades have reported, a rather unusual spot appearing to be a FOX NFL promo aired during yesterday’s NFL pre-game show.  What made it particularly unusual was that it included an EAS-like tone, and had a URL at the bottom of the screen for “WWW.FOXNFLEMERGENCYALERT.COM.”  That URL currently links to a “Let’s Go Brandon” website that I don’t encourage you to visit because our own spam software blocks access to it on the stated grounds of “Risky-Sites.”

We’ve written about the regulatory risks of transmitting false EAS alert tones on multiple occasions (see here, here and here), with the most recent post being about a proposed $272,000 fine against CBS for an EAS tone that was briefly heard in an episode of Young Sheldon.  The principal issue in such circumstances is Section 11.45(a) of the FCC’s Rules:

No person may transmit or cause to transmit the EAS codes or Attention Signal, or a recording or simulation thereof, in any circumstance other than in an actual National, State or Local Area emergency or authorized test of the EAS; or as specified in §§ 10.520(d), 11.46, and 11.61 of this chapter.

In this case, since it was a live broadcast, it would be difficult for an affiliate to move quickly enough to spot and delete the tone before it aired.  Recognizing that this is often the case, the FCC has typically focused inquiries involving network programming on the network’s owned and operated stations rather than on the network’s affiliates.  However, that isn’t always the case, as the FCC has fined individual stations for Children’s Television rule violations even where those violations occurred in network programming.

So an affiliate’s natural reaction in such circumstances might be to lay low and let the network deal with any potential ramifications at the FCC.  However, that isn’t an option, as Section 11.45(b) of the FCC’s Rules states that:

No later than twenty-four (24) hours of an EAS Participant’s discovery (i.e., actual knowledge) that it has transmitted or otherwise sent a false alert to the public, the EAS Participant shall send an email to the Commission at the FCC Ops Center at FCCOPS@fcc.gov, informing the Commission of the event and of any details that the EAS Participant may have concerning the event.

That means remaining silent and hoping it all blows over isn’t an option once an affiliate becomes aware that it has transmitted a false EAS tone.  Section 11.45(b) requires stations to basically hold up their hand and volunteer to the FCC that they aired the tone, and the 24-hour time limit doesn’t give a station much time to contemplate it.  While the FCC and FOX will hopefully resolve any issues with the broadcast itself, stations don’t want to dodge that bullet only to expose themselves to an FCC claim that they failed to promptly report the incident.

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Pillsbury’s communications lawyers have published FCC Enforcement Monitor monthly since 1999 to inform our clients of notable FCC enforcement actions against FCC license holders and others. This month’s issue includes:

  • FCC Settles with Six Major Radio Groups Over Political File Violations
  • Texas Radio Stations Face Proposed Fines for Contest Rule Violations
  • $15,000 Fine Proposed for LPFM Station Airing Commercial Ads

Continue reading →

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Pillsbury’s communications lawyers have published FCC Enforcement Monitor monthly since 1999 to inform our clients of notable FCC enforcement actions against FCC license holders and others.  This month’s issue includes:

  • Arkansas University’s Underwriting Violations Lead to $76,000 Consent Decree
  • Large TV Broadcaster Agrees to Pay $1.3 Million Over Predecessor’s Tower Compliance Problems
  • Recent Fine Cancellations Prompt Broadcasters to Double-Check Fees and Fines

A Word From Our Sponsors: Arkansas University Settles With FCC Over Underwriting Violations

The FCC recently entered into a Consent Decree with an Arkansas university for violating the FCC’s underwriting rules for noncommercial stations.  The university admitted that two of its FM stations aired announcements over several days in 2016 that impermissibly promoted the products or services of its financial contributors.  The two stations are operated by a community college under the University’s control.

Noncommercial educational (“NCE”) broadcast stations are prohibited from airing promotional announcements on behalf of for-profit entities in exchange for any benefit or payment.  Instead, NCE stations may broadcast announcements that identify but do not “promote” station benefactors.  Such messages may not, among other things, include product descriptions, price comparisons, or calls to action on behalf of a for-profit donor.  According to the FCC, these limitations “protect the public’s use and enjoyment of commercial-free broadcasts” and “provide a level playing field for the noncommercial broadcasters that obey the law and for the commercial broadcasters that are entitled to seek revenue from advertising.”

The FCC was tipped off to the violations when the licensees of several nearby commonly-owned stations filed a Formal Complaint outlining over a dozen announcements broadcast on the University’s stations.  The complainants alleged that these messages, which were aired on an ongoing basis in 2016, violated the underwriting rules by either including promotional statements or promoting specific products for sale.  Most of the announcements were sponsored by local businesses, including an announcement for a nearby car dealership described as “impressive with a very clean pre-owned model or program unit,” a furniture store that has a “good deal … going there” where listeners can get “pretty stuff,” and a local insurance agent offering services that he had “never done on radio before.”

The Enforcement Bureau responded to the Formal Complaint by issuing multiple Letters of Inquiry to the University seeking additional information about the announcements and the University’s underwriting compliance efforts.  In its response, the University admitted that the announcements had been simulcast on both stations, but emphasized that the stations’ staff had received “extensive” training on underwriting issues, and that it believed that the stations had complied with the underwriting rules.

To resolve the years-long investigation, the University agreed to enter into a Consent Decree under which the University agreed to: (1) pay a $76,000 civil penalty; (2) admit to violating the FCC’s underwriting rules; and (3) implement a five-year compliance plan to ensure there will be no future violations.

Tower Records: Predecessor’s Lax Oversight of Antenna Structures Leads to $1.3 Million Settlement for Large Broadcast Company

A large television broadcast company has agreed to settle an FCC investigation into whether the prior owner of several of the company’s towers failed to sufficiently monitor and maintain records regarding them.

Part 17 of the FCC’s Rules requires a tower owner to comply with various registration, lighting and painting requirements.  Tower marking and lighting is a vital component of air traffic safety, and noncompliant structures pose serious hazards to air navigation.  To this end, a tower owner is responsible for observing the tower at least once every day for any lighting failures or to have in place an automatic monitoring system to detect such failures.  The tower owner must also maintain a record of any extinguished or improperly functioning lights.  The FCC’s rules also require a tower owner to notify the FCC within 5 days of a change in a tower’s ownership.

In September 2018, a small plane crashed into a southern Louisiana broadcast tower, prompting an FCC investigation into the tower and its owner.  The FCC determined that the tower was registered to a subsidiary of a national broadcaster which at the time controlled over a dozen television stations and related antenna structures.  Following up on the crash, the Enforcement Bureau issued the company a Letter of Inquiry seeking information about its compliance with the FCC’s tower rules.  The company responded by disclosing numerous “irregularities” in its monitoring of the lighting systems of the toppled tower and nine other towers.  It also disclosed that it had failed to keep complete records of a dozen lighting failures at several of its towers, and that it had not notified the Commission of its acquisition of two other towers. Continue reading →

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Pillsbury’s communications lawyers have published FCC Enforcement Monitor monthly since 1999 to inform our clients of notable FCC enforcement actions against FCC license holders and others.  This month’s issue includes:

  • Faith-Based Station Settles With FCC After Preempting KidVid Programming With Fundraising
  • Arizona LPFM Gets License Reinstated in Consent Decree
  • Christmas Tree’s Harmful Interference Results in Consent Decree With LED Company

Gotta Have Faith: Washington TV Station That Preempted Children’s Programming With Fundraising Settles With FCC

The FCC recently entered into a Consent Decree with the licensee of a faith-based Washington TV station for inaccurate Children’s Television Programming Reports and for failing to provide a sufficient amount of “core” children’s educational programming.

Pursuant to the Children’s Television Act of 1990, the FCC’s children’s television programming (“KidVid”) rules require TV stations to provide programming that “serve[s] the educational and informational needs of children.”  Under the KidVid guidelines in place at the time of the alleged violations, stations were expected to air an average of at least three hours per week of “core” educational children’s programming per program stream.  To count as “core” programming, the programs had to be regularly-scheduled, at least 30 minutes in length, and broadcast between the hours of 7:00 a.m. and 10 p.m.  A station that aired somewhat less than the averaged three hours per week of core programming could still satisfy its children’s programming obligations by airing other types of programs demonstrating “a level of commitment” to educating children that is “at least equivalent” to airing three hours per week of core programming.  The FCC has since acknowledged that this alternative approach resulted in so much uncertainty that stations rarely invoked it.

Stations must file a Children’s Television Programming Report (currently quarterly, soon to be annually) with the FCC demonstrating compliance with these guidelines.  The reports are then placed in the station’s online Public Inspection File.  Upon a station’s application for license renewal, the Media Bureau reviews these reports to assess the station’s performance over the previous license term.  If the Media Bureau determines that the station failed to comply with the KidVid guidelines, it must refer the application to the full Commission for review of the licensee’s compliance with the Children’s Television Act of 1990.  As we have previously discussed, the FCC recently made significant changes to its KidVid core programming and reporting obligations, much of it having gone into effect earlier this month.

During its review of the station’s 2014 license renewal application, the Media Bureau noticed shortfalls in the station’s core programming scheduling and inaccuracies in the station’s quarterly KidVid reports over the previous term.  It therefore issued a Letter of Inquiry to the station to obtain additional information.  In response, the station acknowledged that it had in fact preempted core programming with live fundraising, but asserted that it still met its obligations through other “supplemental” programming, albeit outside of the 7 a.m. to 10 p.m. window for core programming.  Inaccuracies in its reports were blamed on “clerical errors.”

The Media Bureau concluded that the station’s supplemental programming did not count toward the station’s core programming requirements.  Without getting into the merits of the programming itself, the Media Bureau found the programming insufficient because it was aired outside of the core programming hours.  The Media Bureau also concluded that the station had provided inaccurate information on several of the quarterly reports.

In response, the FCC and the station negotiated a Consent Decree under which the station agreed to pay a $30,700 penalty to the U.S. Treasury and implement a three-year compliance plan.  In return, the FCC agreed to terminate its investigation and grant the station’s pending 2014 license renewal application upon timely payment of the penalty, assuming the FCC did not subsequently discover any other “impediments” to license renewal.

Radio Reset: LPFM License Reinstated (for Now) in Consent Decree Over Various Licensing and Underwriting Violations

In response to years of ownership, construction, and other problems that culminated in its license being revoked in 2018, the licensee of an Arizona low power FM (“LPFM”) station entered into a Consent Decree with the Media Bureau and the Enforcement Bureau. Continue reading →

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This past Friday, the US Court of Appeals for the District of Columbia Circuit released its long-awaited decision in ACA International et al. v. FCC, a case involving the Telephone Consumer Protection Act (TCPA) that has significant implications for any business contacting consumers by telephone or text. The decision arises out of challenges to an omnibus Declaratory Ruling and Order released by the FCC in July of 2015, which itself was responding to requests for exemption from, or clarification of, the FCC’s TCPA rules, especially the more stringent FCC rules that took effect on October 16, 2013. In the Declaratory Ruling and Order, the FCC adopted a very expansive interpretation of the TCPA, exacerbating, rather than alleviating, long-standing litigation risks that many companies face under the TCPA.

Continue reading →

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Pillsbury’s communications lawyers have published FCC Enforcement Monitor monthly since 1999 to inform our clients of notable FCC enforcement actions against FCC license holders and others.  This month’s issue includes:

  • FCC Proposes Forfeitures Against South Carolina Stations for Failure to Maintain Public Inspection File
  • Noncommercial Station and FCC Settle Dispute Over Promotional Announcements
  • Brooklyn-based Bitcoin Miner Warned Over Harmful Interference
  • FCC Issues Notice to Security Camera Manufacturer for Device ID Violations

FCC Proposes Fine Against Licensee of South Carolina Stations for Failure to Maintain Complete Public Files

In two separate Notices of Apparent Liability for Forfeiture (“NALs”) released on the same day, the FCC found two commonly owned radio stations apparently liable for repeated violations of its public inspection file rule.

Section 73.3526 of the FCC’s Rules requires stations to maintain a public inspection file that includes various documents and items related to the broadcaster’s operations.  For example, subsection 73.3526(e)(11) requires TV stations to place in their public inspection file Quarterly Issues/Programs Lists describing the “programs that have provided the station’s most significant treatment of community issues during the preceding three month period.”

In their respective license renewal applications, the stations disclosed that they had failed to locate numerous Quarterly Issues/Programs Lists from the 2003 to 2010 time period.  According to the licensee, the gaps in its reporting were due to several personnel changes at all levels of the stations as well as computer and software changes made over the past ten years.

Between the two NALs, the FCC found a total of 38 missing Lists (21 for one station, and 17 for the other station), which it considered a “pattern of abuse.” Pursuant to the FCC’s forfeiture policies and Section 1.80(b)(4) of its Rules, the base forfeiture for a violation of Section 73.3526 is $10,000.  The FCC can adjust the forfeiture upwards or downwards depending on the circumstances of the violation.  Here, the FCC proposed a $12,000 forfeiture in response to the station with 21 missing Lists and a $10,000 forfeiture for the station with 17 missing Lists.  Visit here to learn more about the FCC’s Quarterly Issues/Programs List requirements.  For information on maintaining a public inspection file, check out Pillsbury’s advisory on the topic.

“Ad” Nauseam: FCC Resolves Investigation Into Underwriting Rules Violation

The FCC entered into a Consent Decree with the licensee of two noncommercial educational (“NCE”) radio stations in Arizona and California after receiving complaints that the stations aired commercial advertising in violation of the Communications Act and the FCC’s Rules (together, the “Underwriting Laws”).

Section 399B of the Communications Act of 1934 prohibits noncommercial stations from making their facilities “available to any person for the broadcasting of any advertisement.” Section 73.503(d) of the FCC’s Rules prohibits an NCE station from making promotional announcements “on behalf of for profit entities” in exchange for any benefit or payment.  Such stations may, however, broadcast “underwriting announcements” that identify but do not “promote” station donors.  Such identifications may not, among other things, include product descriptions, price comparisons, or calls to action on behalf of a for-profit underwriter.  The FCC recognizes that it is “at times difficult to distinguish between language that promotes versus that which merely identifies the underwriter,” and expects licensees to exercise good faith judgment in their underwriting messages.

In response to complaints from an individual who alleged that the stations had repeatedly violated the Underwriting Laws, the FCC sent the licensee multiple letters of inquiry regarding questionable underwriting messages between August 2016 and March 2017.  According to the FCC, the licensee did not dispute many of the facts in the letters, and the parties entered into the Consent Decree shortly thereafter.  Under the Consent Decree, the licensee (1) admitted that it violated the Underwriting Laws; (2) is prohibited from airing any underwriting announcement on behalf of a for-profit entity for one year; (3) must implement a compliance plan; and (4) must pay a $115,000 civil penalty.

Brooklyn Bitcoin Mining Operation Draws FCC Ire Over Harmful Interference

The FCC issued a Notification of Harmful Interference (“Notification”) to an individual it found was operating Bitcoin mining hardware in his Brooklyn, New York home.

Section 15 of the FCC’s Rules regulates the use of unlicensed equipment that emits radio frequency energy (“RF devices”), a broad category of equipment that includes many personal electronics, Bluetooth and WiFi-enabled devices, and even most modern light fixtures.  Such devices must not interrupt or seriously degrade an authorized radio communication service.  The FCC’s rules require a device user to cease operation if notified by the FCC that the device is causing harmful interference. Continue reading →

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If trying to maintain the required paperwork for political advertising aired by your station gives you a headache, prepare for a migraine of biblical proportions.

With the departure of Commissioner Rosenworcel leaving the FCC in a 2-2 partisan split, there are really only two types of broadcast orders coming out of the FCC these days—those having the unanimous support of all four remaining commissioners, and those that can be done by the Media Bureau on delegated authority with or without the support of the two Republican commissioners.  That was evidenced twice last week.  The first was the Media Bureau’s rejection of various petitions seeking reconsideration of increased ownership reporting requirements for noncommercial stations.  That action generated an immediate response from Republican commissioners Pai and O’Rielly, who released a joint statement chiding the Media Bureau for taking the action right before the FCC changes control, and encouraging the rejected petitioners to appeal the decision to the full Commission for reversal:

The Commission’s ruling no longer enjoys the support of the majority of Commissioners—nor is there a majority that supports today’s Media Bureau decision—so it was wrong for the Bureau to bypass Commissioners and reaffirm these reporting requirements unilaterally. . . . The good news is that today’s decision need not be the final word. We encourage public broadcasters to file an application for review so that the newly constituted Commission will have an opportunity to revisit this matter. It is pointless to require board members of NCE stations to report sensitive personal information (like the last four digits of individual Social Security numbers) to the Commission and will only serve to discourage these volunteers from serving their communities.

We might now be headed down a similar path with the political file.  This past Friday evening, the Media Bureau released an Order expanding the recordkeeping associated with airing political advertising.  Perhaps simply an error, but contributing to the appearance that the Order was rushed out to beat the change in administrations, is the fact that the formatting and text of the Friday night version deteriorates badly in the last third of the Order, with no text at all in the last 49 footnotes, the paragraph numbering changing, and the text of some paragraphs being in bold type and/or all capitals.  The cleaned up version can now be found here.  The Order responds to complaints filed by activist groups against eleven different stations owned by a Who’s Who of television broadcasters, with the FCC admonishing nine of the eleven stations for political ad recordkeeping violations.  A separate order admonishing a twelfth station in response to a more recent complaint was also released Friday night.

But why would an order admonishing stations for alleged recordkeeping violations (which originated from complaints sitting at the FCC since mid-2014) need to be rushed out?  Perhaps because it also “clarifies” that the admittedly vague rules on political ad recordkeeping require much more expansive political file records than most anyone has previously suggested (at least anyone who wasn’t trying to use the records for other than their intended purpose; for example, as a proxy for overall political ad expenditures).  The clarifications apply not just to broadcasters, but to cable, DBS, and satellite radio providers as well.

Read without an understanding of the current political ad landscape, the clarifications probably seem dryly mundane.  They include the following: Continue reading →

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Consumer protection is always in style at the Federal Trade Commission (FTC”). When 50 fashion “influencers” flooded Instagram, all wearing the same dress in photos tagged “@lordandtaylor”, and an article featuring the same dress appeared in the online fashion magazine Nylon, some at the FTC suspected an advertising campaign masquerading as a social media dialogue.  While this matter arose in a “new media” context, and therefore impacts all businesses’ online activities, broadcasters are doubly affected—online and on-air—by the FTC’s action.

As we describe in more detail in our Client Advisory Lord and Taylor Case Shows the Importance of Transparency in Advertising, the FTC’s investigation into a supposedly viral phenomenon unveiled an integrated advertising campaign. Among other things, Lord & Taylor formally contracted with fashion influencers, giving them the dress for free and compensating them to “product bomb” Instagram with photos of themselves wearing the dress on one particular weekend.  Lord & Taylor approved the influencers’ posts and required them to include the @lordandtaylor tag and #DesignLab hashtag.  Lord & Taylor also contracted with Nylon to run an article about its new Design Lab collection, featuring the dress in the article and on Nylon’s Instagram page as well.  Again, Lord & Taylor reviewed the content before it was published.  However, Lord & Taylor did not require the influencers or Nylon to disclose their connection to Lord & Taylor or that they had been compensated for posting the photos and comments.

In December 2015, the FTC released its Enforcement Policy Statement on Deceptively Formatted Advertisements.  The Policy Statement provides an overview of how the FTC intends to apply its consumer protection principles to “native advertising”—online advertising material that resembles editorial content, product reviews, or other content which could mislead consumers into believing that the advertising isn’t really advertising.  It also notes some factors that have contributed to a rise in native advertising online, such as the increased ability of publishers to quickly and cheaply reformat and reuse content, evolving business models around monetization of content, and the ability of consumers to skip or block ads placing pressure on advertisers to capture consumers’ attention.  However, the Policy Statement concludes that “[a]lthough digital media has expanded and changed the way marketers reach consumers, all advertisers, including digital advertisers, must comply with the same legal principles regarding deceptive conduct the Commission has long enforced.”

In setting out what those legal principles are, the FTC referred back to many cases involving a wide variety of media, including television infomercials that blurred the line between advertising and editorial content.  The FTC brought numerous cases in the 1980s and 1990s against infomercials that looked like investigative news reports or consumer product review content and required the addition of conspicuous “PAID ADVERTISEMENT” disclosures at the beginning and throughout the program where product ordering information was presented.

The FTC’s approach to digital marketing is similar. In its Native Advertising: A Guide For Businesses released along with the December Policy Statement, the FTC noted “[t]he more a native ad is similar in format and topic to content on the publisher’s site, the more likely that a disclosure will be necessary to prevent deception.”  In the Lord & Taylor case, the Nylon article used language similar to traditional editorial content recommending certain fashion choices.  Specifically, it stated:  “[W]e’re taking out the guess work and introducing you to spring’s must-have line: Lord & Taylor’s Design Lab.”  The FTC faulted Lord & Taylor for not requiring a disclosure that the article was paid-for advertising.

In addition, the FTC’s updated Endorsement Guides published in 2009 require that when advertisers recruit endorsers and provide them with free merchandise or other compensation, they must require their endorsers to clearly and conspicuously disclose their connection to the advertiser and, further, to monitor those endorsements for accuracy and inclusion of the required disclosure language.  Here, while Lord & Taylor did review and even edit the endorsements, it did not require any disclosure of the endorser’s relationship with Lord & Taylor.  We have written extensively about the Endorsement Guides and how they apply to broadcasters, including common situations that arise in on-air “banter”, here and here.

As a result of its investigation into Lord & Taylor’s advertising of the Design Lab line, the FTC and Lord & Taylor agreed to a settlement which imposes a number of conditions beyond mere compliance on Lord & Taylor going forward.  These include filing various reports with the FTC, preserving documents for later FTC review should it be necessary, and providing copies of the settlement agreement to all those who have anything to do with creating similar advertising campaigns. The case is an important reminder to all advertisers that, as the FTC has said, “[r]egardless of the medium in which an advertising or promotional message is disseminated, deception occurs when consumers acting reasonably under the circumstances are misled about its nature or source, and such misleading impression is likely to affect their decisions or conduct regarding the advertised product or the advertising.”

Do your online and on-air promotions meet this test?

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The FCC’s new Licensee-Conducted Contest Rule became effective this past Friday.  Under the new rule, a broadcast licensee conducting a contest still has the obligation to disclose the material terms of the contest “fully and accurately” and to conduct the contest substantially as announced.  However, as we wrote last September, the new rule allows broadcasters to meet these requirements by posting the contest terms on their websites rather than reading them on-air.  To take advantage of this new flexibility, broadcasters must:

  • Post the terms on the station’s or licensee’s website, or if neither the station nor the licensee has a website, on a free website that is available to the public 24/7, without registration;
  • Broadcast the website address with sufficient information for a consumer to find the terms easily, using simple instructions or natural language;
  • Broadcast the website address periodically throughout the term of the contest;
  • Establish a conspicuous link or tab on the home page of the website that takes consumers to the contest terms;
  • Maintain the terms on the website for at least 30 days after the contest has ended and conspicuously mark those that are expired, including the date a winner was selected;
  • On the rare occasions that a change in terms occurs during the contest, announce the changes on-air within 24 hours and periodically thereafter, and direct participants to the written terms on the website; and
  • Assure that the contest rules posted online conform to those announced on-air.

The effective date of the new rule has been eagerly anticipated by broadcasters as the change grants them more flexibility in announcing contest terms, avoids long and complicated contest announcements on-air, and permits participants to review the rules at their leisure.  However, in making the change, the FCC noted that “[a]s with all elements of contest-related announcements, the burden is on the broadcaster to inform the public, not on the public to discern the message.”

Indeed, the law views the rules of a contest or sweepstakes to be a contract between the sponsor (station) and anyone who enters the contest, or even anyone who tries to enter and fails to do so successfully.  If the sum total of your on-air contest rules are “be the 103rd caller after X song is played” and a vague “station policy” somewhere on the website that says you can only win once every 30 days, you have left a lot out of your “contract.”  For example, when a station ran a contest on-air like the one above and did not get many callers, the DJ simply awarded the prize to the last person to call in after hours of trying to attract more callers.  The station was fined by the FCC because it did not run the contest substantially as advertised.  Properly written contest rules should account for such situations, as well as other foreseeable developments, such as the phone lines going down after the trigger song has been played.  A station with contest rules that don’t address likely (or even unlikely) contest developments is inviting challenges from both contestants and regulators.

In that regard, as we noted in FCC Proposes to Clear Airwaves of Boring Contest Disclosures, But State Issues Remain, stations should remember that the FCC is not the only regulator watching out for contest and sweepstakes violations.  For example, some states’ contest laws require that all announced prizes be awarded in order to prevent “bait and switch” contests.  For stations giving away “time sensitive” prizes such as concert tickets that have to be used on a specific date, the rules should address the situation where a winner is chosen but then turns down the prize or simply does not claim it because they cannot attend on the date specified.  If the rules say that an alternate winner will be chosen after 10 days, there may not be enough time left before the concert to award the prize.  The station with poorly written contest rules must then choose between violating the law by failing to award a prize, or violating the law by failing to conduct the contest in accordance with the announced rules.  Badly-drafted contest rules are a liability for any business, but are worse for broadcasters, as in addition to all of the state and federal laws governing contests, broadcasters are uniquely subject to the FCC’s contest oversight as well.

Finally, while you might imagine that contest complaints come from those who lost the contest (and indeed they often do), many come from contest winners.  While professional contestants who enter every contest will complain about the valuation placed on a prize for tax purposes, first-time winners are more likely to complain about having to sign a release to claim the prize, or where the prize is large, having to provide the station with their Social Security Number, appear in person, or attend a further event, such as the day when all the winners of keys must try them out in the grand prize car.  These obligations need to be clear in the contest rules, not just to avoid liability, but to ensure the station is able to get the promotional value it anticipated from the contest.  Contestants who demand anonymity and refuse to sign releases greatly undercut the promotional value of a big contest.

The bottom line is, now that the FCC will let you post your rules online for contestants and regulators to scrutinize, you need to ensure you have rules that can withstand scrutiny.

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I wrote in March of last year that the FCC had proposed fines of $1,120,000 against Viacom, $530,000 against NBCUniversal, and $280,000 against ESPN for airing ads for the movie Olympus Has Fallen that promoted the movie with an EAS alert tone. Seven Viacom cable networks aired the spot a total of 108 times, seven NBCUniversal cable networks aired it a total of 38 times, and ESPN aired it a total of 13 times on three cable networks.

According to the FCC, NBC elected to pay its $530,000 fine shortly thereafter and call it a day, but Viacom and ESPN challenged their respective fines, arguing that the fines should be rescinded or reduced because:

  • as programmers, Viacom and ESPN lacked adequate notice that Section 11.45 of the FCC’s Rules (the prohibition on false EAS tones) and Section 325 of the Communications Act (the prohibition on false distress signals) applied to them;
  • the prohibition on false EAS tones does not apply to intermediary program distributors, as opposed to broadcast stations and cable systems that transmit directly to the public;
  • the use of the EAS tone in the ad was not deceptive as it was clear from the context that it was not an actual EAS alert; and
  • Viacom and ESPN did not knowingly violate the prohibition on transmitting false EAS tones.

In an Order released earlier today, the FCC rejected these arguments, noting that Section 325 of the Communications Act and Section 11.45 of the FCC’s Rules are not new, and that they apply to all “persons” who transmit false EAS tones, not just to broadcasters and cable/satellite system operators. The FCC found that transmission of the network content to cable and satellite systems for distribution to subscribers constituted “transmission” of false EAS tones sufficient to trigger a violation of the rule. In reaching this conclusion, the FCC noted that both Viacom and ESPN had reviewed the ad before it was aired and had the contractual right to reject an ad that didn’t comply with law, but had failed to do so. The FCC also concluded that it was irrelevant whether the use of the EAS tone was deceptive, as the law prohibits any use of the tone except in an actual emergency or test of the system.

In line with many prior FCC enforcement decisions, the FCC found the violations to be “willful” on the grounds that it did not matter whether the parties transmitting the ads knew they were violating a law, only that they intended to air the ads, which neither party disputed. The FCC summed up its position by noting that it “has consistently held that ignorance or mistake of law are not exculpating or mitigating factors when assessing a forfeiture.”

While Viacom and ESPN also challenged the sheer size of the fines, the FCC noted that the base fine for false EAS tone violations is $8,000, and that in assessing the appropriate fines here, it took into account “(1) the number of networks over which the transmissions occurred; (2) the number of repetitions (i.e., the number of individual transmissions); (3) the duration of the violation (i.e., the number of days over which the violation occurred); (4) the audience reach of the transmissions (e.g., nationwide, regional, or local); and (5) the extent of the public safety impact (e.g., whether an EAS activation was triggered).” Because there were “multiple violations over multiple days on multiple networks, with the number of transmissions doubled on some networks due to the separate East Coast and West Coast programming feeds,” the FCC concluded the size of the fines was appropriate.

In describing more precisely its reasoning for the outsize fines, the FCC’s Order stated:

As the rule clearly applies to each transmission, each separate transmission represents a separate violation and Viacom cites no authority to the contrary. Moreover, the vast audience reach of each Company’s programming greatly increased the extent and gravity of the violations. Given the public safety implications raised by the transmissions, and for the reasons set forth in the [Notice of Apparent Liability], we find that the instant violations, due to their egregiousness, warrant the upwardly adjusted forfeiture amounts detailed by the Commission.

Finally, to buttress its argument for such large fines, the FCC pulled out its “ability to pay” card, noting the multi-billion dollar revenues of the companies involved and stating that “entities with substantial revenues, such as the Companies, may expect the imposition of forfeitures well above the base amounts in order to deter improper behavior.”

While today’s Order is not surprising in light of the FCC’s increasingly tough treatment of false EAS tone violations since 2010, it is not all bad news for the media community. To the extent that one of more of the Viacom, ESPN or NBCUniversal networks that transmitted the ads is likely carried by nearly every cable system in the U.S., the FCC could have elected to commence enforcement actions and issue fines against each and every system that failed to delete the offending content before transmitting the network programming to subscribers. Pursuing such fines would be expensive for all affected cable and satellite systems, but particularly devastating for smaller cable systems.

While it is always possible that the FCC could still commence such proceedings, it is notable that the FCC specifically rejected Viacom’s argument that it was unfair for the FCC to fine the networks while not fining the ad agency that created the ad or the cable and satellite systems that actually delivered the ad to subscribers. It therefore appears that, at least for now, the FCC is content to apply pressure where it thinks it will do the most good in terms of avoiding future violations. Should the FCC decide to broaden its enforcement efforts in the future however, we’ll be hearing a lot more about my last post on this subject–ensuring you are contractually indemnified by advertisers for any illegal content in the ads they send you to air.