Articles Posted in Advertising

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Beginning tomorrow, October 16, 2013, new FCC “robocalling” rules go into effect that require all businesses to obtain specific written consent from a consumer before sending that consumer marketing messages by telephone or text. While we did an earlier Pillsbury Advisory on these rules, they still appear to be catching businesses off-guard, as many business owners incorrectly assumed that the rules were targeted only at robocallers and text spammers, and are just now beginning to realize that the breadth of business activities reached by these rules is far more extensive.

When calling or texting a cell phone for any non-emergency reason, the FCC’s rules have always required that businesses using autodialer technology, like that used in text campaigns, or pre-recorded voices, must first get express consent from the recipient. Prior express consent has also been required before making marketing calls to residential landlines, but the rules contained an exception to that requirement if the business had an established business relationship with the called party (e.g., you ordered something from their catalog in the past eighteen months).

The big change under the new rules is that the prior express consent required to send marketing messages to cell phones (the FCC treats calls and texts the same) or to residential landlines must now be in writing, and there is no longer an exception to that requirement for those with an established business relationship with the called party.

While the impact of this rule change on robocallers is obvious, it applies to most other businesses as well. For example, many broadcast stations have a variety of texting programs, ranging from news, weather and traffic alerts to promotional texts about upcoming programming events or contests. Those stations should now review how the numbers they are texting were originally added to their contact lists, and either be certain that they meet the FCC’s new requirements, or suspend texting to those numbers.

For purely informational texts, such as news, weather and traffic alerts, the station need only have previously received express consent to send the type of text message involved. Written consent was not required and is still not required if there is no marketing component to the call. As a result, if the station previously stated it would only use the consumer’s cell phone number to send weather alert texts, then weather alerts are the only type of texts the station can send to those who signed up for that type of text message. The weather alert contact database therefore could not be combined with the station’s marketing contact database.

The rub is that such stations must also make sure that those weather texts do not include any marketing messages in addition to the weather-related messages. If a marketing component is included (and the definition of marketing for this purpose is very broad), starting tomorrow, they will need to get written consent before sending any more of those messages.

To send promotional or other forms of marketing texts, a business needs to have made a clear and conspicuous disclosure and received clear consent in writing. Importantly, the business cannot require that the written consent be given as a condition of purchasing any product or service. As to the consent being in writing, the FCC permits electronic signatures collected via webforms, email, text messages, telephone keypresses, or voice recordings.

Businesses that previously signed consumers up for their texting programs via a webform, for example, may have given sufficiently clear notice and generated an electronic signature sufficient to fulfill these requirements. Affected businesses should therefore review the language used in their disclosures to be sure that it clearly communicated to the consumer what the texting program involves, and that it did not condition the consumer’s ability to make a purchase on their giving this consent. If a business is able to meet these tests, then it should verify that it has retained sufficient records to demonstrate that it obtained the necessary written consent before continuing to text the affected consumers.

While we have covered the high points of the new rules in this post, those affected should definitely read the more detailed description found in our Pillsbury Advisory. In particular, businesses need to be aware that these new rules were adopted pursuant to the Telephone Consumer Protection Act. That law is the source of many class action lawsuits brought on behalf of consumers who have received texts or calls alleged to be in violation of the law, and provides statutory damages where violations are found to have occurred.

Unfortunately, the prospect of class action damages is likely to attract lawsuits for even benign potential violations of the new rules, and just being named a defendant in such a lawsuit can have devastating consequences for that business. While the effort involved in ensuring that your business is in compliance with these rules could be substantial, the risks of proceeding to contact consumers via marketing texts or calls, even where they are your existing customers, is far too great to be ignored.

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One of the perennial challenges of being a broadcaster is determining what you can air, when you can air it, and how it must be aired without incurring the wrath of the federal government. While the FCC tends to be the federal agency most commonly encountered on content issues, various other government agencies create additional layers of complexity, with the Department of Justice, the Food and Drug Administration, and the Federal Trade Commission all having an interest in what is aired, particularly where it involves advertising. As new products become available and are marketed, the government struggles to keep up, sometimes leaving the media in the lurch as to whether a particular ad is “safe” for airing.

For that reason, broadcasters have stepped carefully with regard to advertisements for medical marijuana (which I’ve discussed previously here), tobacco products, and other items of federal concern. While enforcement encounters with the FCC can be unpleasant, encounters with the DOJ can be downright incarcerating. Fortunately, broadcasters’ encounters with the DOJ are rare, and usually involve the DOJ bringing a court action to enforce collection of an FCC-imposed fine. However, that also means the body of DOJ precedent on substantive content issues can be pretty thin, leaving broadcasters guessing as to what can and cannot be aired.

One area where the DOJ has definitely had a broad role to play is in the advertising of tobacco products. From the original ban on broadcast cigarette advertising implemented in 1971 to its later expansion to little cigars (1973) and smokeless tobacco (1986), the DOJ is the entity charged with enforcing the ban on most types of tobacco broadcast advertising. While a ban on tobacco advertising might seem straightforward, complying with it can be fairly complex, resulting in a number of DOJ decisions regarding what can be said in advertising for tobacco shops and tobacco products not affected by the ad ban. Our recently updated Pillsbury Advisory on tobacco advertising restrictions is a good place to learn more about those nuances.

One new product that continues to garner attention (and confusion) is e-cigarettes, which are battery-powered devices designed to imitate the look and feel of a cigarette, but which deliver nicotine vapor rather than tobacco smoke to the lungs. While e-cigarettes have become fairly common, only limited research has been done on their health effects, and many countries have now regulated them in a variety of ways.

In the U.S., the FDA has expressed serious concerns about the manufacturing and marketing of e-cigarettes, but has not yet been successful in implementing restrictions on e-cigarette sales. However, there have been indications the FDA will move as early as next month to launch a rulemaking to implement restrictions on e-cigarette sales. While it is likely that any ultimate FDA rules will prohibit the marketing of e-cigarettes to minors, it is at this point unknown whether the FDA might try to impose broader restrictions on advertising, and whether such restrictions would stand up in court. What is known is that rulemakings at federal agencies take time, so it will likely be a while before any new FDA rules could be implemented.

That pretty much leaves the question of whether e-cigarettes can currently be advertised up to the DOJ. Given the DOJ’s dim view under existing tobacco ad restrictions of any ad that even mentions the word “cigarette”, many assumed that the DOJ would take a similar view of e-cigarette advertising. However, because the DOJ has not publicly moved to take action against a growing number of e-cigarette ads, broadcasters have so far been left wondering where the government stands on the issue.

We now know the answer to that question. My Pillsbury colleague Paul Cicelski has obtained clarification from the Department of Justice in the form of a letter stating the DOJ’s position on e-cigarette advertising. The letter notes that the ad ban covers “any roll of tobacco” wrapped in paper, tobacco, or any other substance likely to be purchased by consumers as a “cigarette”. It proceeds to note that while e-cigarettes are often manufactured to look like conventional cigarettes, they do not contain a “roll of tobacco” and therefore are not subject to the federal ban on cigarette ads.

So does that mean the floodgates are open on e-cigarette ads? Not quite. First, the DOJ letter indicates that it reflects the views of the Consumer Protection Branch of the DOJ and not “any other governmental office, agency or department,” specifically noting that the Federal Trade Commission has authority over e-cigarette ads that are deceptive, such as those that make health claims without adequate scientific support. Similarly, many states have grown concerned about e-cigarettes and have introduced legislation to restrict their use and advertising. As a result, in addition to being wary of health claims in ads like “e-cigarettes will help you stop smoking”, broadcasters should check the laws of their state for any state-based limitations on e-cigarette advertising. Finally, as noted above, the FDA is clearly interested in this area, and likely will have something to say about e-cigarette regulation once it concludes its soon-to-be-launched e-cigarette proceeding.

Fortunately, the FTC and FDA have traditionally focused their enforcement efforts on advertisers rather than on the media entities carrying the ads, so even if e-cigarette regulations are ultimately adopted, those regulations are unlikely to principally target broadcasters for merely running the ads. As a result, the DOJ’s position on e-cigarettes goes a long way toward resolving a significant source of confusion and angst for many broadcasters while opening up an additional avenue for broadcast ad dollars.

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In what has been a recurring theme at CommLawCenter, I’ve written about the FCC rule prohibiting the airing of Emergency Alert System codes and tones unless there is an actual emergency or EAS test. Despite the rule, the draw of using an EAS tone is apparently irresistible, and we’ve seen it used in movie ads, oil company ads, and even zombie alerts.

Unlike many FCC rules, the ambiguity of which can leave seasoned practitioners arguing over what is or isn’t prohibited, Section 11.45 of the FCC’s Rules has been a model of clarity:

“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.”

As a result, while advertisers might succumb to the temptation to slip an EAS tone (really, it’s more of a digital squeal) into their ads, the broadcaster’s duty was straightforward–try to catch the ad before it airs, and then let the advertiser know that the ad can’t be run unless it is modified to delete the tone.

Yesterday, however, life suddenly became more complicated for broadcasters when stations began receiving copies of a Public Service Announcement from the Federal Emergency Management Agency seeking to educate the public about the Emergency Alert System using the EAS tone to get that message across. Station operators were understandably confused, thinking that surely FEMA, as a fellow federal agency to the FCC (and an expert on all things related to EAS), wouldn’t be distributing a PSA that included an illegal EAS tone.

That was not, however, a safe assumption. On multiple occasions, federal and state agencies have, for example, distributed ads or PSAs that lack the sponsorship identification announcement required by the FCC, with one of the more famous examples leading to a 2002 FCC decision refusing to grant a waiver of its sponsorship identification rule to allow the White House Office of National Drug Control Policy to run anti-drug ads without disclosing that it was the sponsor.

As stations began to decline to run the PSAs for fear or incurring the FCC’s wrath, the FCC moved quickly (and quietly, I might add) to break from its prior approach, and today released a decision granting an unprecedented one-year waiver of Section 11.45, permitting FEMA spots to use the EAS tone as long as they make “clear that the WEA [Wireless Emergency Alert] Attention Signals are being used in the context of the PSA and for the purpose of educating the viewing or listening public about the functions of their WEA-capable mobile devices and the WEA program.” The FCC also “recommend[s] that FEMA take steps to ensure that such PSAs clearly state that they are part of FEMA’s public education campaign.”

The good news today is that the FCC approached the problem head on by granting a waiver rather than trying to “interpret” its rule to somehow not cover the FEMA PSA tones. Such an interpretation would have left broadcasters scratching their heads every time an EAS tone pops up in a future spot, trying to figure out whether that use might also fit into such an exception. The bad news, however, is that broadcasters have now been told that fake EAS tones are sometimes okay, and they need to be watching the FCC’s daily releases to determine if a particular use has suddenly become acceptable. Hopefully, such spots will actually educate the public to better understand the purpose of EAS alerts, as opposed to merely acclimating them to hearing the tone on-air and learning to ignore it.

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Today, December 13, 2012, is the effective date of the FCC’s rules implementing the Commercial Advertisement Loudness Mitigation (CALM) Act. As a result, all commercial broadcast television stations and multichannel video program providers (“MVPDs”) must have by today either sought a waiver or installed equipment and undertaken procedures to comply with the Advanced Television Systems Committee (ATSC) A/85: “ATSC Recommended Practice: Techniques for Establishing and Maintaining Audio Loudness for Digital Television,” also known as the RP.

For locally inserted commercials, stations must install and maintain equipment and software that measures the loudness of the content and ensures that the dialnorm metadata value matches the loudness of the content when encoding audio for transmission (try saying that three times fast!). For commercials already embedded in the programming, stations must be able to pass through that CALM-compliant programming without adverse changes.

As long as that benign pass-through is accomplished, stations can rely on appropriate certifications from program suppliers to demonstrate compliance with respect to embedded commercials. If a program supplier does not provide the certification, “large” television stations and “large” and “very large” MVPDs (as defined by the FCC) must conduct annual spot checks of the programming. The first spot checks must be completed one year from today, by December 13, 2013. Details on these compliance requirements can be found in Paul Cicelski’s post on the CALM Act earlier this year. We will also shortly be posting a Pillsbury Advisory on ensuring continuing CALM Act compliance.

As noted above, the FCC created a waiver procedure for stations and MVPDs where compliance would be financially burdensome, allowing them up to a year of additional time to come into compliance. Waiver requests were originally due back in October, but the FCC announced two days ago that it would accept waiver applications from small television stations filed through today. “Small” television stations, that is, those with less than $14 million in revenues in 2011 or that are in markets 150 to 210, were not required to submit highly detailed financial data with their waiver requests, and the FCC indicated that waiver requests would be deemed granted upon filing unless the FCC later advises the applicant otherwise.

In response, more than 125 waiver requests were filed. Earlier this week, the FCC granted two of them, including one from a television station in the midst of a studio move that will include installation of upgraded equipment for CALM Act compliance. Stations that do not have a waiver request on file with the FCC by today need to have the equipment and procedures in place to ensure they are operating in compliance with the CALM Act. That means that stressed television viewers will be having a calmer holiday season, while station and MVPD engineers and managers stress out trying to remain CALM.

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Resolving a conundrum faced by every business that has entered the world of consumer texting, the FCC has ruled that businesses are not violating the federal Telephone Consumer Protection Act (“TCPA”) by sending a confirmation text to consumers who have just opted out of receiving further texts. However, the FCC did impose limitations on the content of such confirmation texts to ensure compliance with the TCPA. The threshold requirement is that the purpose of the reply text be solely to confirm to the consumer that the opt-out request has been received and will be acted on. The FCC then enumerated several additional requirements that businesses must observe when sending confirmation texts to avoid violating the TCPA. For those affected, which is pretty much every business that uses texts to communicate with the public, we have released a Client Alert on the subject.

To many, sending a confirmation text to a consumer who has previously opted in to receiving a company’s text messages would appear to be nothing more than good customer service and an extension of the common practice of sending a confirmatory email message when a consumer has chosen to unsubscribe from an email list. Indeed, many wireless carriers and mobile marketing and retail trade associations have adopted codes of conduct for mobile marketers that include sending confirmation texts to consumers opting out of future text messages.

However, the TCPA, among other things, makes it illegal to make a non-emergency “call” to a mobile telephone using an automatic telephone dialing system or recorded voice without the prior express consent of the recipient. The FCC’s rules and a decision in the U.S. Court of Appeals for the Ninth Circuit define a “call” as including text messages. As a result, many businesses have had class action lawsuits filed against them by consumers arguing that, once they send a text message opting out of receiving future texts, their prior consent has been revoked, and the business violates the TCPA by sending ANY further texts, even in reply to the consumer’s opt-out text.

Seeking to avoid facing such lawsuits and the potential for conflicting decisions from different courts, businesses sought the FCC’s intervention. After reviewing the issue, the FCC rejected the fundamental argument raised by the class action suits, noting that the FCC has never received a single complaint from a consumer about receiving a confirmatory text message. The FCC did note, however, that it had received complaints from consumers about not receiving a confirmation of their opt-out request. The Commission therefore held that when consumers consent to receiving text messages from a business, that consent includes their consent to receiving a text message confirming any later decision to opt out of receiving further text messages.

To avoid creating a loophole in the TCPA that might be exploited by a business, the FCC proceeded to set limits on confirmation texts designed to ensure that they are not really marketing messages disguised as confirmation texts. First and foremost, the implied permission to send a confirmation text message only applies where the consumer has consented to receiving the company’s text messages in the first place. Next, the confirmation text message must be sent within five minutes of receiving the consumer’s opt-out request, or the company will have to prove that a longer period of time to respond was reasonable in the circumstances. Finally, the text of the message must be truly confirmatory of the opt-out and not contain additional marketing or an effort to dissuade the consumer from opting out of future texts. You can read more about the FCC’s decision and these specific requirements in the firm’s Client Alert.

By providing clarity on the relationship between confirmation texts and the TCPA, the FCC’s ruling provides marketers and other businesses with some welcome protection from class action TCPA suits. In an accompanying statement, Commissioner Ajit Pai stated that “Hopefully, by making clear that the Act does not prohibit confirmation texts, we will end the litigation that has punished some companies for doing the right thing, as well as the threat of litigation that has deterred others from adopting a sound marketing practice.” Businesses just need to make sure they comply with the FCC’s stated requirements for confirmation texts to avail themselves of these protections.

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While most presidential candidates were concentrating yesterday on last minute campaign events aimed at swaying undecided voters, independent presidential candidate Randall Terry was instead focused on winning votes at the FCC, filing multiple election day political advertising complaints against broadcast stations.

I wrote last week of an FCC decision holding that a DC-area station had failed to provide Terry reasonable access to airtime as required by Section 312 of the Communications Act. According to the FCC, Terry, an independent presidential candidate known for seeking to air visually disturbing political ads prominently featuring aborted fetuses, was entitled as a federal candidate to purchase airtime because he was on the ballot in West Virginia. While Terry was apparently not on the ballot in DC, Maryland, or Virginia, the area primarily served by the station, the FCC concluded that the station’s Noise Limited Service Contour covered nearly 3% of the population of West Virginia, making Terry a legally qualified candidate for purposes of demanding airtime on the DC-area station.

Apparently buoyed by that success, Terry yesterday filed complaints against five Florida television stations arguing that he has once again been denied reasonable access rights. What makes these filings odd is that, although dated November 5th, they were not filed with the FCC until November 6th, election day. Even if Terry actually intended to file them on November 5th, that would still be too late for the FCC to take any meaningful action before the election was over. That means Terry has already begun the process of positioning himself for the next election, and is perhaps looking to establish friendly FCC precedent now that can be used against stations then.

What also makes Terry’s Florida filings notable is that he is not seeking reasonable access as a candidate for president (presumably because he was not on the presidential ballot in Florida). Instead, his reasonable access complaints are based upon being on the ballot as a candidate for the U.S. House of Representatives, representing South Florida’s 20th Congressional District. Terry alleges in his complaints that all five stations cited Section 99.012(2) of the Florida Statues as a reason for not accepting his ads. That Section provides that “No person may qualify as a candidate for more than one public office, whether federal, state, district, county, or municipal, if the terms or any part thereof run concurrently with each other.” Since Terry was on the ballot in a number of states running for president, the stations argued that the Florida Statute prevented him from also appearing on a ballot in Florida as a candidate for the U.S. House of Representatives. The stations’ argument is that Terry was therefore not a legally qualified candidate for federal office in Florida, and thus not entitled to reasonable access.

Terry’s response to that argument cites no caselaw, FCC or otherwise, but argues by analogy that stations did air Romney/Ryan ads in Florida despite Ryan also being on the ballot in Wisconsin to keep his House seat. That is not a particularly strong argument, however, as I suspect that stations in Florida were actually airing Romney ads, and Romney was unquestionably a legally qualified candidate on the ballot. If Ryan also appeared in those ads, that would not alter a station’s obligation to provide reasonable access to Romney for his ads, and the “no censorship” provision of the Communications Act means that Romney is free to present anyone else he wants in his ads without interference.

Since the FCC is not generally in the business of interpreting state election laws, the central question in these complaints is whether the FCC will defer to a licensee’s reasonable judgment as to who is a legally qualified candidate in the licensee’s own state. If not, broadcasters will find that once simple reasonable access analysis is growing steadily more complex and dangerous. As foreshadowed by last week’s post, reasonable access issues seem destined to become a growing part of future elections. Yesterday’s Terry complaints appear to be an effort to turn up the heat on stations, even where there is no useful remedy available to a candidate whose multiple campaigns have already concluded.

Copies of the Terry complaints can be found here.

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The FCC today released a political advertising decision that, while perhaps not surprising, will still alarm many broadcasters. Back in February, I wrote a pair of posts (here and here) about Randall Terry, who was then seeking airtime during the Superbowl to air ads featuring graphic footage of aborted fetuses, ostensibly in support of his effort to become the presidential nominee of the Democratic Party. It appears that the Democratic Party didn’t want him, as the Democratic National Committee sent stations a letter asserting that Terry was not a candidate for the Democratic nomination and was not entitled to the broadcast airtime benefits legally qualified federal candidates receive.

In my first post in February, I noted that Section 312 of the Communications Act, which requires broadcast stations to grant “reasonable access” to airtime for federal candidates, was growing increasingly susceptible to a First Amendment challenge, and that the situation presented by the Terry ads — broadcasters being forced to air visually repugnant material that they would otherwise never subject their audience to, regardless of their own political bent — represents just the kind of scenario that might motivate broadcasters to challenge this statutory requirement. It certainly gives a judge or Congress an appealing set of facts to consider overturning or reforming the current law.

It is also worth noting that broadcasters are not allowed to channel such ads into parts of the day when children are less likely to be in the audience. This inability to channel such ads away from children has always been curious, as a candidate can hardly complain about being unable to reach an audience that is too young to vote anyway (and the candidate is of course free to reach out to them with more age-appropriate ads in any event). Indeed, the FCC, which has done a respectable job over the years of applying the Communications Act’s political ad requirements in the real world, once held that broadcasters could choose to shift such ads away from kid-friendly hours. The FCC was rebuffed in court, however, in a decision that focused entirely on how such channeling could infringe upon a candidate’s freedom of expression, seemingly oblivious to the freedom of expression of stations unwilling to subject their child viewers to such content.

As I wrote in my second post, the FCC was able to avoid a confrontation over recent Terry ads for a bit longer when it ruled in February that Terry was not a legally qualified presidential candidate on the Illinois ballot (where the station being challenged was located). It also ruled that even had that not been the case, the station was reasonable in turning down a request for Superbowl ad time since it is a uniquely popular event in which the station might well find it impossible to accommodate ads from competing candidates demanding “equal opportunities” under the Communications Act to air their ads in the Superbowl as well.

Knowing how attractive the plum of guaranteed ad time at a station’s lowest unit charge is to anyone wishing to get their message out there, it came as no surprise when the Terry campaign, now running Terry as an independent candidate, filed another complaint, this time against Washington, DC station WUSA(TV). Terry sought access on the basis of being a legally qualified candidate in West Virginia, a small portion of which, he asserted, falls within WUSA(TV)’s signal.

The station rejected Terry’s ads, noting that Terry was not a legally qualified candidate in its DC/Maryland/Virginia service area. When challenged at the FCC, it submitted a Longley-Rice signal contour map, which takes blocking terrain (e.g., mountains) into account, and which indicated that the station’s actual coverage of West Virginia was slim to none (“de minimis” in FCC parlance).

In determining where reasonable access must be granted, the FCC looks at a station’s “normal service area”, and for TV, it has generally considered a station’s Grade B contour to be the “normal service area”. The transition to digital TV, however, has eliminated the analog concept of a Grade B contour. In reaching today’s decision, the FCC concluded that since the FCC considers a digital station’s Noise Limited Service Contour (NLSC) to be the equivalent of an analog Grade B contour in other FCC contexts, it is appropriate to use the NLSC as the appropriate “normal service area” for purposes of reasonable access complaints. While engineers readily acknowledge that Longley-Rice contour analysis is a more accurate predictor of actual signal reception than the NLSC, Longley-Rice analysis can be complex, and it appears the FCC opted for the simplicity and bright line certainty of using the NLSC. While the NLSC represents a somewhat hypothetical coverage area, NLSC coverage maps are widely available, including on the FCC’s own website, making it an easier tool for candidates to utilize in planning their media buys.

Since, according to the FCC, WUSA(TV)’s NLSC covers nearly 3% of West Virginia’s population, the FCC concluded in today’s decision that the station was unreasonable in rejecting Terry’s ads. While the FCC’s decision is a pragmatic one, it adds more kindling to the reasonable access fire, as stations are now forced to offend their audiences with content from candidates that are legally qualified in any area that is within their NLSC service area, whether or not actual TV reception exists. This not only increases the number of reasonable access requests stations may face, but will further antagonize their viewers, who might understand why a station has to air ads for a candidate that is on the ballot in their area, but will be particularly perplexed as to why a station is airing offensive content from a candidate they have never heard of and cannot vote for or against. When Congress drafted the reasonable access and “no censorship of political ads” provisions of the Communications Act, it probably assumed that extreme content would not be a problem since a candidate was unlikely to air such content if he or she wanted to be elected. However, that logic evaporates when the viewing audience doesn’t even have the opportunity to vote against such a candidate.

While the FCC appears to have been concerned that a more complex contour analysis could be gamed by a broadcaster, the result instead unfortunately encourages issue activists of every persuasion to game the system for their own gain. In the present case, it is pretty obvious that buying very expensive airtime in the nation’s capital is not a cost-effective way of reaching less than 3% of the voters in West Virginia, and that the real audience is the large DC-area population for which Terry was apparently unable to qualify to be on the ballot. That became even more obvious when WUSA(TV) provided the Longley-Rice contour map indicating that the station actually had little or no coverage in West Virginia, but the Terry campaign nonetheless continued to press for airtime on the station.

The obvious path for future issue activists is to declare their candidacy for federal office, but instead of doing the hard work of qualifying for the ballot in large population centers in order to be heard, taking the easier path of qualifying for the ballot in less populated surrounding areas that are just within the fringe coverage of a big market station’s predicted NLSC coverage. By following this formula, they get guaranteed access to airtime in front of a large market audience, and at much lower rates than commercial advertisers would pay, with the added benefit that the station cannot edit the ad or decline to air it no matter how offensive the content.

For those who make the not unreasonable argument that putting up with some questionable exploitation of the political ad rules is necessary to ensure that legitimate candidates can get their message out, consider the following: only federal candidates have a right of reasonable access. In this heated political season, particularly in the heavily contested large population centers, stations have been forced to preempt the spots of many of their normal commercial advertisers to make room for political spots for federal candidates (seen a car ad lately?), and local and state candidates have similarly suffered from having their ads pushed aside to make way for federal candidate ads. As a result, forcing broadcasters to air content that offends adult viewers, disturbs child viewers, and damages the relationship of trust between the broadcaster and its public harms more than just the broadcaster and its audience. It harms each and every local and state candidate that actually is on the ballot in a station’s market. They too would like to get their message out, but in their case, to people who can actually vote for them and that are affected by who is elected to represent them. To the extent that “all politics is local”, it make little sense to shunt aside these local and state candidates merely to guarantee access to those using the Communications Act’s “federal formula” to game the system for their own agendas.

While today’s decision is not one that will be welcomed by broadcasters, make no mistake, it is not the FCC’s fault that we have reached this point. The reasonable access requirements for federal candidates are encoded into the Communications Act, and there is only so much the FCC can do in applying the statute in a political landscape that is far more complex than those who drafted these provisions likely ever contemplated. With election season nearly over, and many stations sold out of airtime through the election, the immediate impact of today’s decision will be limited. It is a safe bet, however, that the underlying issue will continue to haunt future elections.

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As I discussed last month, the FCC has adopted rules requiring television stations to replace their existing locally-maintained public inspection files with digital files to be placed online on an FCC-hosted website, including stations’ detailed political records. The majority of television stations will not be required to begin posting their political file documents online until July 1, 2014, but stations in the top-50 markets that are affiliated with ABC, NBC, CBS or Fox will be required to comply once the new regulations go into effect, assuming that the rules survive challenges made by TV broadcasters.

Broadcasters have launched a three-pronged attack against the FCC’s proposed new regulations with a series of recent filings with the U.S. Court of Appeals for the D.C. Circuit, the Office of Management and Budget (OMB) and the FCC. The core thrust of the broadcasters’ challenges are focused on the requirement that TV stations disclose online very sensitive rate information about political advertising. Broadcasters have assailed the proposed rules for dramatically increasing regulatory burdens on TV stations while at the same time failing to require similar online disclosures by cable TV systems or other competitors to broadcast television.

The first shot fired after the FCC adopted the new regulations was by the National Association of Broadcasters (NAB) in a Petition for Review filed with the U.S. Court of Appeals for the DC Circuit. In its Petition, the NAB is asking the Court to vacate the FCC’s action “on the grounds that it is arbitrary, capricious, in excess of the Commission’s statutory authority, inconsistent with the First Amendment, and otherwise not in accordance with law.” An NAB spokesman summed it up by charging the FCC with “forcing broadcasters to be the only medium to disclose on the Internet our political rates” and jeopardizing “the competitive standing of stations.”

A number of broadcast groups opened up a second front against the FCC’s new rules earlier this week, with filings asking the OMB to take a hard look at the FCC’s proposed regulations under the Paperwork Reduction Act of 1995 (PRA), and to invalidate the rules due to the FCC’s failure to comply with the PRA. On behalf of 46 State Broadcasters Associations, Dick Zaragoza and I filed comments in the proceeding arguing that the FCC violated the PRA by, among other things, failing to analyze the large burdens the proposed new regulations will have on television stations in general, and on small television station businesses in particular. We also advanced the argument of the NAB and others that the new rules are unnecessarily and impermissibly duplicative of the records already required to be maintained online by the Federal Election Commission under the Bipartisan Campaign Reform Act of 1992.

In the third salvo, a coalition of broadcast groups calling themselves the “Television Station Group” is fighting the adoption of the rules at the FCC. This group filed a Petition for Reconsideration with the FCC asking the Commission to modify the proposed rules due to concerns with the requirement that stations reveal online precisely how much they charge for political advertising. The law requires that broadcasters charge their lowest unit rate for political ads during a pre-election window, and the Television Station Group told the FCC that if those rates are widely and easily accessible on an FCC-hosted website (and not just to candidates), commercial advertisers may make requests for that same low rate. The unintended effect could be to force broadcasters to homogenize their rates so that every ad costs the same, eviscerating the current cost advantage to candidates of being charged only the “lowest unit rate”. In short, the Television Station Group argues that the disclosure of price information is anti-competitive and disrupts the commercial advertising marketplace because “stations’ political ad rates, by law, must be based on commercial advertising rates.”

Although the new rules are under fire on a number of fronts, it remains to be seen if broadcasters will be able to successfully block the FCC’s efforts. Before the FCC’s regulations can go into effect, at a minimum, they will have to be approved by OMB through the PRA process which, in this case, will not likely be the usual perfunctory rubber stamp the FCC often receives from OMB. Also, Court of Appeals challenges to the rules are not due until July 30, 2012, and, at some point, parties are likely to ask both the FCC and the courts to hold the effective dates of the rules in abeyance until the broadcasters’ multiple challenges can be heard. In other words, the battle over the FCC’s proposed online public/political file rules is far from over.

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A panel of the United States Court of Appeals for the Ninth Circuit in San Francisco today ruled, in a 2 – 1 decision, that the long-standing prohibition on the carriage of paid political and issue advertising by noncommercial television and radio stations is unconstitutional and may no longer be enforced by the FCC.

The majority opinion in Minority Television Project Inc v. FCC was authored by Judge Carlos Bea, a George W. Bush appointee, and joined in by Judge John Noonen, a Reagan appointee; Judge Richard Paez, a Clinton appointee, wrote a dissenting opinion. The case arose when Minority Television Project, licensee of noncommercial television station KMTP-TV was fined $10,000 by the FCC for violating the prohibition in Section 399B of the Communications Act against noncommercial stations carrying paid advertising for commercial entities. According to the FCC, KMTP-TV had carried over 1,900 advertisements for entities such as State Farm, Chevrolet and Asiana Airlines in the period from 1999-2002. Minority Television Project paid the fine, but filed suit in District Court for reimbursement of the fine and declaratory relief. After its arguments were rejected by the District Court, Minority Television Project brought this appeal.

The Court of Appeals focused on whether the statutory prohibitions on paid advertising in Section 399B are consistent with the U.S. Constitution. It concluded that the statute contains content-related restrictions that must be reviewed under the standard of “intermediate scrutiny,” which provides that the government must show that the statute “promotes a substantial governmental interest” and “does not burden substantially more speech than necessary to further that interest.”

The Court found that the prohibition on broadcasting paid commercial advertising on behalf of for-profit entities, the primary focus of Minority Television Project’s appeal, was narrowly tailored and promotes the substantial governmental goal of preventing the commercialization of educational television. As a result, the fine imposed on Minority Television Project was upheld. However, the Court went on to address the prohibition on carriage of paid candidate and paid issue advertising by noncommercial stations. It found no legitimate governmental goal underlying that prohibition. The Court reviewed the Congressional record developed when the prohibition on political and issue advertising was adopted, and failed to find any evidence to support the provision. It therefore held that aspect of the law to be unconstitutional.

The decision leaves open many important questions as to how to implement it. For example, the questions of whether or how the lowest unit charge provision of Section 315 of the Communications Act will apply to noncommercial stations are not addressed. Similarly, the Decision does not consider whether federal candidates will be entitled to
“reasonable access” rights on noncommercial stations, permitting federal candidates to buy advertising on noncommercial stations that do not want to accept political advertising. While the reasonable access provision of the Communications Act appears to exempt noncommercial educational stations from that requirement, it is a content-related law, and therefore raises questions as to whether the disparate treatment of commercial and noncommercial stations for this purpose is constitutional. Other practical questions, such as the application of equal opportunities rights, political file obligations, and the like will also have to be resolved if this decision is implemented. More broadly, if the decision stands, it could have a fundamental impact on the nature and funding of noncommercial broadcasting.

The Ninth Circuit’s decision only applies to states located within the jurisdiction of that Court (Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon and Washington). The FCC and the Justice Department may seek review by the entire Ninth Circuit, sitting en banc, or seek review by the U.S. Supreme Court. As that drama plays out during an active political season, a lot of noncommercial stations will be scratching their heads trying to figure out what they can, can’t, and must do in light of the decision. Conversely, a lot of commercial stations aren’t going to be happy if they find that their political advertising revenues are being diverted to noncommercial stations. One thing is certain–if upheld, the implications of this decision for both noncommercial and commercial stations will be far reaching.

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The clock is ticking away the minutes until December 13, the effective date of the FCC’s new Commercial Advertisement Loudness Mitigation Act (CALM Act) rules. TV broadcasters and multichannel video programming distributors (MVPDs) attending the upcoming NAB Show in Las Vegas will be looking for the equipment necessary to meet the CALM Act requirements, and they will have plenty to see and do. According to the NAB’s agenda for the Vegas Show, there will be seminars led by equipment manufacturers discussing the CALM Act and dozens of vendors and manufacturers on hand to showcase their CALM Act monitoring, processing, and verification equipment at the Las Vegas Convention Center during the event.

The reason CALM Act compliance and equipment are likely to be “big in Vegas” this year is because, as you may recall, last December the FCC adopted rules for the implementation of the CALM Act which require TV stations and MVPDs to keep the volume of commercials at the same level as the accompanying programming. The FCC’s new rules incorporate the Advanced Television Systems Committee’s (ATSC) Recommended Practice (RP), which essentially allows broadcast stations and MVPDs to comply with the rules by meeting the requirements of the ATSC protocol (known as the A/85 RP). Stations and MVPDs must be in compliance with the A/85 RP and the FCC’s rules by December 13, 2012.

The CALM Act arises from decades of complaints to the FCC and Congress regarding excessively loud commercials. In fact, according to the FCC’s Notice of Proposed Rulemaking in the CALM Act proceeding, loud commercials “have been a leading source of complaints to the Commission since the FCC Consumer Call Center began reporting the top consumer complaints in 2002.” The subsequent rules adopted by the FCC are therefore designed to limit the volume of commercials transmitted to consumers and apply to advertisements locally inserted by television stations and MVPDs as well as to advertisements embedded in programs from third-party suppliers.

For locally inserted commercials, TV stations and MVPDs will be required to demonstrate that they have installed the necessary equipment to ensure compliance. The FCC will assume that a broadcast station or MVPD is in compliance if it has installed, uses, and maintains equipment that complies with the A/85 RP. For advertisements already embedded in programming received from third parties, networks and other program suppliers must certify that their programming is in compliance with the CALM Act.

The FCC’s rules establish a “safe harbor” for embedded advertisements received from suppliers. To use the safe harbor, TV stations and MVPDs are allowed to rely on certifications of compliance from their program supplier which certify that the programming is A/85 RP-compliant. For programming that has not been certified, “large” TV stations (i.e., those stations with more than $14 million in annual revenue) and “very large” MVPDs (i.e., those with over 10 million subscribers) may still transmit the third-party programming, but will be required to perform annual “spot checks” of 100 percent of the third-party programming they transmit. “Large” MVPDs (i.e., those with at least 400,000 subscribers nationally) will need to annually spot check 50 percent (chosen at random) of the noncertified channels carried by any system operated by the MVPD. The spot check requirements will phase out after two years. Small stations and cable systems do not need to conduct any spot checks to be in the safe harbor.
While many broadcasters and MVPDs won’t be at the NAB Show to attend “loudness legislation” seminars or to acquire the hardware and software tools needed to comply with the FCC’s CALM Act rules, all TV broadcasters and MVPDs need to make sure that they are familiar with the rules and understand their CALM Act obligations. Even though the CALM Act has been passed by Congress and is being implemented by the FCC, there is little doubt that the FCC will continue to hear complaints from consumers regarding loud commercials for the foreseeable future. The difference is that the FCC now has an enforcement mechanism to address those complaints.

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