Under a new federal law, businesses are forbidden from restricting, prohibiting or penalizing consumer-posted reviews of the business or its goods and services. The Consumer Review Fairness Act of 2016 goes into effect tomorrow, March 14, 2017, and declares unlawful any “form contract” that prohibits or restricts the ability of an individual to engage in a “covered communication,” which is broadly defined to include any review, performance assessment, or other similar analysis of the company’s goods, services, or conduct. Our Pillsbury colleagues Michael Heuga, Amy Pierce and Catherine Meyer discuss the details of the new law in a recent Pillsbury Client Alert.
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 $25,000 Fine Against Individual for Operating a Pirate Radio Station
- FCC Admonishes Wireless Carrier for Data Breach
- Telecommunications Relay Service Providers Agree to $9.1 Million Settlement
Pirate Radio Operator Faces $25,000 Proposed Fine After Flaunting Multiple FCC Warnings
After issuing multiple warnings, the FCC proposed a $25,000 fine against a New Jersey man for operating an unlicensed radio station. Section 301 of the Communications Act prohibits any person from operating any apparatus for the transmission of energy or communications or signals by radio within the United States without FCC authorization.
In October 2015, the licensee of an FM translator station in Jersey City complained to the FCC that an unauthorized station was causing co-channel interference. FCC agents verified the complaint and issued a Notice of Unlicensed Operation (“NOUO”) to the owner of the apartment building where the unlicensed station was operating. The unauthorized broadcast subsequently stopped. However, in May 2016, the FCC received another complaint and found that the unlicensed station was operating again. FCC agents issued a second NOUO, this time to both the individual operating the pirate station and the building owner. The individual contacted the FCC in June 2016, at which time he was warned he could face additional enforcement action if unlicensed operations continued.
Despite that admonition, FCC agents found the individual again engaged in unlicensed operation in August 2016, this time at a different site. The FCC issued another NOUO, but later that month found the individual operating without a license again, this time at yet another site.
FCC guidelines set a base fine for unauthorized operation of $10,000 for each violation or each day of a continuing violation. The FCC may adjust the fine upward or downward after taking into account the particular facts of each case. Here, the FCC found that a “significant upward adjustment was warranted” due to the individual’s disregard of multiple warnings. As a result, the FCC proposed a $20,000 base fine—$10,000 for the May 2016 operations and another $10,000 for the August 2016 operations—and applied a $5,000 upward adjustment, for a total proposed fine of $25,000.
Hack of Wireless Carrier Leads to Admonishment by FCC
The FCC admonished a national wireless phone carrier for a 2015 data breach in which a third party gained unauthorized access to personal information collected by the carrier to run credit checks on customers.
Section 222(a) of the Communications Act requires telecommunications carriers to “protect the confidentiality of proprietary information of, and relating to . . . customers.” It also requires carriers to “take every reasonable precaution” to protect personal customer information. Section 201(b) of the Act requires practices related to interstate or foreign telecommunications to be “just and reasonable.” Continue reading →
It took a while to get to this point, but at the first public meeting of the Pai FCC, the Commission voted today to eliminate the requirement that stations maintain “Letters and Emails from the Public” in their public inspection files. As discussed below, that decision will have differing impacts on TV and radio stations, and even among radio stations.
When the FCC charged ahead to move television public inspection files online in 2012, there didn’t seem to be any upside for broadcasters, who objected loudly. Those objections were primarily based upon the fact that the FCC had managed to find a way to expend even more of a broadcaster’s resources on the rarely-read file, requiring that it now also be uploaded to an online FCC database. Uploading a public file is no small task, as an FCC review of TV public files in Baltimore in 2012 revealed that some contained more than 8,000 pages. In response to those objections, the FCC announced when it adopted the change that it would automatically upload applications, kidvid reports, and other documents it had access to, reducing the number of documents stations would need to upload themselves.
‘Twas the night before Christmas,
and all through the station,
staffers laughed and sang carols,
and enjoyed jubilation.
Except for the staffers in charge of the file,
who were sweating and cursing a deadline most vile.
A Christmas Eve deadline that was set by the fed,
a public file deadline that kept them from bed.
With December 24 approaching, radio stations across the country are checking their quarterly programs/issues lists twice, lest the FCC leave coal in their stocking this holiday season (and no, nothing even comes close to rhyming with “quarterly programs/issues lists”).
As we’ve posted previously and detailed in our Public Inspection File Special Advisory, the FCC adopted a Report and Order earlier this year extending its online public file requirements to broadcast radio stations, starting with commercial radio stations in the Top-50 Nielsen Audio markets with five or more full-time employees.
Beginning June 24, 2016, these “First-Wave” radio stations were required to upload, on a going-forward basis, all public file materials created on or after that date (with the exception of letters and emails from the public, which, as we’ve explained before, should not be uploaded to the online file due to privacy concerns and instead must be maintained in the local public file). The online public file requirements won’t kick in for all other radio stations until March 1, 2018.
These First Wave radio stations have until December 24, 2016 to upload all public file documents created prior to June 24. There are a few exceptions. The first (for the reason noted above) is letters and emails from the public. The FCC has had a proceeding pending since May to eliminate this requirement entirely, but has not yet done so. The other exception is political file materials, which stations need only upload on a going-forward basis. First Wave stations may continue to retain political file documentation that existed prior to June 24 in their local public files until the expiration of the two-year retention period.
On the TV side, where online public files have been the norm since 2012, the FCC has handed out admonishments and thousands of dollars in fines to stations for failing to upload all required materials on time. While many Americans try to save money by delaying their shopping until after Christmas, missing this Christmas Eve rush could be quite expensive. The FCC’s Enforcement Bureau doesn’t believe in post-holiday discounts.
As he rushes to accomplish his list of objectives before the change in administrations, FCC Chairman Tom Wheeler was able to cross one off that list last week. For the first time, the FCC imposed privacy requirements on providers of broadband internet access services (BIAS). The much-anticipated Order requires BIAS providers to notify customers about the types of information the BIAS providers collect about their customers; how and for what purposes the BIAS provider uses and shares this information; and in some circumstances requires customer consent for the use and sharing of this information. This order was an outgrowth of the FCC’s 2015 Open Internet Order, which reclassified BIAS as a telecommunications service and wrested privacy jurisdiction from the Federal Trade Commission.
The NAB has negotiated a waiver agreement with Sony Music Entertainment that will once again enable radio stations to stream Sony-licensed music unhindered by certain restrictions established by the statutory music streaming license. Stations wishing to take advantage of the Sony waiver need to opt in on the NAB website, and (depending on the amount of streaming they do) may need to place a button on their websites or apps to enable listeners to click through to purchase Sony song downloads. A previous waiver agreement with Sony, as extended, expired on July 31, 2016, leaving stations without a waiver for the past few months. NAB’s new agreement with Sony will last until December 31, 2020.
In a Public Notice released today, the FCC has taken the next steps towards implementing the expanded online public inspection file, which is set to go live on June 24th. Specifically, the FCC announced that on June 13, 2016 at 1:00 p.m. Eastern Time, it will hold an online demonstration on using the new online public file. In addition, the FCC publicized the Internet address for the new online public file, which licensees must use to create the required link from their websites to the online public file.
As we previously described in Neither Sleet Nor Snow Can Keep the Radio Public File from Going Online and All New Online Public File for TV, Radio, Cable and Satellite Coming June 24th, the FCC adopted a Report and Order in January 2016 extending the online public inspection file requirement to broadcast and satellite radio licensees and cable and satellite television operators. That requirement is currently applicable only to full power and Class A television stations. Pursuant to a phased-in schedule, commercial radio stations that have five or more employees and are located in the Top 50 Nielsen Audio markets, as well as satellite radio licensees, cable systems with 1000 or more subscribers, and DBS operators, must begin using the new system on June 24, 2016. While commercial radio stations not included in this group as well as all noncommercial radio stations are exempt from the new online public file requirement until March 1, 2018, they are allowed to voluntarily commence use of the new system sooner. Because these exempt stations are permitted to transition early, the demonstration should be of interest to all radio station licensees. The demonstration will take place in the Commission Meeting Room, but can be viewed live at https://www.fcc.gov/news-events/events/2016/06/demonstration-expanded-online-public-inspection-file-interface.
Today’s Public Notice also notes that the website address where the new online public file will be hosted will be https://publicfiles.fcc.gov/. Once a station has transitioned to the online public file, it must provide a link to the new online public inspection file from the home page of the station’s website, if it has one. Full power and Class A television stations that already have such a link will need to update that link to reflect the new website address.
The FCC released the tentative agenda for its May 25 Open Meeting today, and topping the agenda is an item that could lift a burden that has been on the shoulders of commercial broadcasters for half a century. The FCC will vote on adopting a Notice of Proposed Rulemaking to eliminate the requirement that commercial broadcast stations retain copies of letters and emails from the public in their public inspection files.
That simple description understates, however, the actual impact the proposed change could have. Letters and emails from the public may have at one time simply been one category of documents among many that broadcasters were required to keep in the public file, but when the FCC started requiring that public files be moved online, it recognized that “including these documents in the online file could risk exposing personally identifiable information and . . . requiring stations to redact such information prior to uploading these documents would be overly burdensome.” As a result, the FCC decided that while it would require broadcasters to upload all other public file documents to the online file, broadcasters would not be permitted to upload letters or emails from the public and instead would have to continue to maintain those documents in the local public file at the station’s main studio.
In the rulemaking proceeding that resulted in the online public file requirement being expanded to radio, we filed comments on behalf of all 50 State Broadcasters Associations questioning the utility of maintaining a physical public file at the station solely to hold letters from the public:
If every part of the file is moved online except Letters from the Public, it’s hard to imagine anyone ever visiting a station solely for the thrill of reading its mail. Still, station personnel must remain eternally vigilant for that one person who might show up to look at what will be the last vestige of a station’s local public file.
Those comments encouraged the FCC to take steps to eliminate the requirement, explaining that “as long as this single requirement effectively forces stations to maintain a local public file regardless of whether they also have an online public file, the burden of maintaining both files will for many small stations be a bridge too far.” Commissioner O’Rielly added his support in a blog post this past September.
The biggest benefit of this change, if adopted, would be to allow stations to cease having to maintain a local “paper” public file and ensure that it is continuously available to the public during regular business hours (including lunchtime). This would not only benefit stations struggling to ensure that there is always a staffer standing by to provide immediate access to the file, but increasingly important, eliminate a major security risk for broadcast stations seeking to prevent dangerous individuals from entering the building, as happened last week in Baltimore.
If the FCC ultimately eliminates the requirement to maintain letters and emails from the public in a local public file, access to the other content in the file will still be available to the public (online), and stations will no longer have to grant access to an individual just because he knows the “open sesame” phrase of American broadcasting: “I’m here to see the public file.”
In a blog post today (All That’s Old is New Again), Chairman Wheeler hinted that this rulemaking is unlikely to see much resistance, stating that elimination of this “outdated public file requirement” would be consistent with the agency’s “process reform initiative to review all Commission regulations and update or repeal outdated and unnecessary rules.” Broadcasters couldn’t agree more.
In a recently issued Notice of Proposed Rulemaking, the FCC asked for comments on proposed rules that would apply the traditional privacy requirements of the Communications Act to providers of broadband Internet access services. This proceeding is an outgrowth of the FCC’s decision last year in the Open Internet Order to reclassify broadband as a telecommunications service, subject to certain requirements under Title II of the Communications Act. Specifically, Section 222 of the Act imposes privacy obligations on telecommunications carriers and, in this proceeding, the FCC is considering whether to apply those rules, or other rules that might be more applicable to protect consumers, to providers of Internet access services.
The proposed rules focus on transparency, choice and data security. According to the FCC, adoption of the rules will ensure that consumers (i) have the information needed to understand what data broadband providers are collecting and what they do with that information, (ii) can decide how their information is used, and (iii) are protected against the unauthorized disclosure of their information.
- Transparency. The FCC expects that broadband providers’ privacy policies would include disclosure of what information they collect and for what purpose, what information is shared and with whom, and how consumers can opt in or out of use and sharing of their personal information.
- Choice. The proposed rules allow the use of personal information as needed to provide broadband services and for other purposes that make sense within the context of the service provider-customer relationship. They also allow service providers to use customer personal information to market other communications services unless the consumer opts out of such usage, but require specific opt-in approval from customers before broadband providers can share customer information with third parties that do not offer communications services. The proposed rules include mechanisms to document customer opt-in and opt-out choices and provisions on how to notify customers of privacy policies.
- Data Security. Broadband providers would be required to ensure the security, confidentiality and integrity of any customer information they receive. This would include requirements for regular risk management assessments and training of employees that handle customer information. The NPRM also proposes to require broadband providers to notify affected customers within ten days of the discovery of a data breach that triggers customer notification requirements, and seeks comment on whether broadband providers should also notify customers after discovery of conduct that could reasonably be tied to a breach. Further, the NPRM proposes to require broadband providers to notify the FCC of all data breaches, and to notify other federal law enforcement of breaches that impact more than 5,000 customers. The NPRM proposes to require notification to federal law enforcement within seven days of discovery of such a breach, and three days before notification to the customer, and would allow law enforcement to seek delay of customer notification. Broadband providers would be required to keep records of any data breaches and notifications for a minimum of two years.
The FCC suggested that it broadly wants to protect personally identifiable information, which, in the broadband context, would include any information that is linked or linkable to an individual and is acquired by the service provider in connection with its provision of broadband services. This could include: (1) service plan information, including type of service (e.g., cable, fiber, or mobile), service tier (e.g., speed), pricing, and capacity (e.g., information pertaining to data caps); (2) geo-location; (3) media access control (MAC) addresses and other device identifiers; (4) source and destination Internet Protocol (IP) addresses and domain name information; and (5) traffic statistics. The FCC seeks comments on whether other types of information should also be protected, including port information, application headers, application usage and customer equipment information.
The FCC acknowledged that there are existing state privacy laws that could overlap with the proposed rules. To resolve any conflicts, the proposed rules would preempt state laws that were inconsistent with the FCC’s rules—with the FCC making preemption determinations on a case-by-case basis. In addition, the rules would prohibit broadband providers from conditioning the offering of service, or the continuation of services, on a customer’s agreement to waive privacy rights guaranteed by law or regulation.
The proposed rules, like the Open Internet Order itself, drew dissents from Republican Commissioners Pai and O’Rielly. They question the FCC’s jurisdiction to regulate Internet service providers, suggest that the Federal Trade Commission has established standards and precedents to protect consumer privacy, and question whether any rules can be effective that are not also applied to edge and content providers, such as Netflix and Twitter. The Open Internet Order is currently being appealed in the United States Court of Appeals for the DC Circuit, and a decision is expected within the next three months.
Comments on the proposed rules are due May 27, 2016. Reply Comments are due June 27, 2016.
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?