FCC Enforcement Monitor November 2022
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:
- Broadcaster Receives $518,283 Fine for Local TV Ownership Rule Violation
- Ohio LED Sign Manufacturer Enters $47,600 Consent Decree for Marketing Unauthorized Devices
- FCC Reduces Fine to $3,400 for Washington LPTV Licensee’s Unauthorized Operation and Untimely License Applications
TV Broadcaster Receives Statutory Maximum Fine for Violating FCC Multiple Ownership Rule
A large multi-market television company (the “Company”) was fined $518,283 for violating the FCC’s rule prohibiting one entity from owning two top-four rated TV stations in the same Nielsen Designated Market Area (“DMA”). This Forfeiture Order follows a July 2021 Notice of Apparent Liability (“NAL”), which we wrote about here.
In July 2020, the Company acquired the non-license assets and network affiliation of a top-four rated station in the Anchorage, Alaska DMA and placed the network’s programming on a non-top-four rated station that was already owned by the Company. At the time of the transaction, the Company owned one top-four station in the market and one that it claimed organically improved its ratings to join the top four and therefore was not in violation of 47 C.F.R. 73.3555, which includes the Local Television Ownership Rule (the “Rule”). The Rule prohibits an entity from owning two full-power television stations in the same DMA if both commonly owned stations are ranked among the top-four rated stations in the market. However, the Rule permits a top-four duopoly if one of the stations was outside the top four and organically improved its ratings to join the top four. Note 11 (the “Note”), which was added to the Rule in 2016, bars the common ownership of two top-four stations with overlapping contours in the same DMA through the acquisition of a network affiliation and says:
An entity will not be permitted to directly or indirectly own, operate, or control two television stations in the same DMA through the execution of any agreement (or series of agreements) involving stations in the same DMA, or any individual or entity with a cognizable interest in such stations, in which a station (the “new affiliate”) acquires the network affiliation of another station (the “previous affiliate”), if the change in network affiliations would result in the licensee of the new affiliate, or any individual or entity with a cognizable interest in the new affiliate, directly or indirectly owning, operating, or controlling two of the top-four rated television stations in the DMA at the time of the agreement.
The FCC found that the transaction—acquiring the network affiliation and placing that programming on a lower-rated station—was the functional equivalent of a license transfer or assignment and effectively turned the station into a top-four station in violation of the Rule. The Forfeiture Order noted that the Company had not sought a waiver of the Rule or contacted FCC staff about the permissibility of the transaction.
In response to the NAL, the Company argued that (1) because one of its stations had improved its ratings and already achieved top-four status prior to the transaction, the “plain language” of the Note was not implicated by the transaction; (2) the Company lacked notice that the Note prohibits purchases of network affiliations, rather than just affiliation swaps; and (3) the FCC’s interpretation of the Note constitutes impermissible regulation of the Company’s content choices for its station. The FCC rejected these arguments. It found that the relevant ratings showed the station as the fifth-ranked (not top four, as the Company contended) station in the market before the network’s programming caused it to enter the top four. It also found that the Company could not rely on an exemption to the Rule that allows a network to offer an affiliation to a duopoly owner (one top-four station and one non-top-four station) if the network is unhappy with its current affiliate and the proposed affiliate has “demonstrated superior station operation.” In this case, the Company indicated it declined an offer from the network to acquire the affiliation and instead bought the affiliation from the current affiliate. The FCC also pointed to its Second Report and Order that provided more detail on affiliation acquisitions as notice of permissible transactions and stood by its finding that the Rule and accompanying Note 11 do not regulate a Company’s content choices, but merely market concentration.
The FCC concluded that the appropriate fine would be $8,000 for each day the violation persisted, which would result in a total fine of $1,720,000. However, the statutory cap on fines for a single violation is $518,283. As a result, the Commission reduced the proposed fine to that amount and indicated it did not see a justification for any further reduction when considering the nature and duration of the violation and the Company’s ability to pay.
LED Sign Manufacturer Settles Equipment Marketing Investigation for $47,600
The FCC entered into a Consent Decree with an Ohio-based sign manufacturer, resolving an investigation into whether the manufacturer unlawfully marketed light-emitting diode (“LED”) signs in the United States. The entity manufactures, advertises, and sells fully assembled LED signs. The investigation found, and the manufacturer admitted, that it marketed several unauthorized LED signs without the required FCC equipment authorization, labeling, and user manual disclosures and failed to retain required test records in violation of the Communications Act and the FCC’s Rules. Continue reading →