Articles Posted in Contests & Promotions

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Pillsbury’s communications lawyers have published the 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:

  • Florida Radio Station Faces $14,000 Proposed Fine for Contest Rule Violations
  • $6,500 Fines Targeted at Mississippi and Tennessee FM Translators for Late-Filed License Renewal Applications and Unauthorized Operation
  • FCC Continues Focus on Collecting Unpaid Regulatory Fees from Broadcasters

FCC Fines Florida Radio Station for Contest Rule Violations

The FCC proposed to fine a radio broadcaster $14,000 for violating the Commission’s Contest Rule while conducting a multi-station contest.  Specifically, the FCC issued a Notice of Apparent Liability for Forfeiture (NAL) asserting that the broadcaster failed to select and/or notify contest winners in a timely fashion, as required by the licensee’s announced contest terms.

Section 73.1216 of the FCC’s Rules requires a licensee to “fully and accurately disclose the material terms” of a contest it broadcasts or promotes and to conduct the contest “substantially as announced and advertised.”  Material terms include, among other things, eligibility restrictions, the time and means of selecting winners, and the extent, nature, and value of prizes.  Prizes must be awarded promptly, and the FCC has consistently found violations where stations failed to award prizes in accordance with the announced contest terms.

In April 2021, the FCC received a complaint alleging that one of the licensee’s radio stations had not conducted a contest in a manner “substantially as announced and advertised.”  The Enforcement Bureau issued a Letter of Inquiry (LOI) to the licensee in August 2021.  In its November 2021 response, the licensee explained that during the first half of 2021, it had conducted a nationwide contest on 194 of its stations.  During the contest, each participating station announced a contest “keyword” once an hour, for eleven hours each day, for 27 days.  Listeners could qualify to win by submitting this keyword via text message or the internet before the end of the hour in which the word was announced.  One national winner would then be picked each hour from across all stations, creating 297 winners (11 per day x 27 days).  The prize was a $1,000 check and winners were to be notified within 72 hours, according to contest terms.

Upon review, the licensee discovered that as a result of human error, the contest had not been conducted according to the announced contest terms.  In its LOI response, the licensee disclosed that (1) the part-time employee tasked with randomly selecting a national winner from among those qualified sometimes failed to do so; (2) the part-time employee’s manager did not provide supervision to confirm winners were selected; and (3) some winners were never notified they had been selected.  Ultimately, 50 winners out of 297 were not timely selected and/or notified.  After receiving the LOI but before submitting its response to the FCC, the licensee selected and notified 50 “replacement” winners.

The licensee argued that its actions did not amount to a violation of the rules because (1) an insubstantial number of winners that were not timely selected/notified compared to the total number of winners; (2) the contest terms only required the licensee to select “a total of up to, but not more than,” 297 verified winners; (3) it was not done intentionally, but was merely the “poor performance of two employees” that caused the selection/notification failures; and (4) the licensee went to “great lengths” to mitigate the selection/notification failures, eventually awarding prizes to all “winners” who completed the required paperwork. Continue reading →

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Pillsbury’s communications lawyers have published the 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 $8,000 Fine for Contest Rule Violations
  • Business Communications Company Settles Business Radio Investigation by Agreeing to Compliance Plan and $100,000 Penalty
  • FCC Issues $16,500 Fine to Alabama FM Translator for Multiple Rule Violations

California FM Station Receives $8,000 Proposed Fine for Contest Rule Violation

The FCC proposed a fine of $8,000 against the licensee of a California FM radio station for violating the FCC’s Contest Rule.  Specifically, the FCC issued a Notice of Apparent Liability for Forfeiture (NAL) asserting that the licensee failed to conduct the contest substantially as announced.

Section 73.1216 of the FCC’s Rules requires a licensee to “fully and accurately disclose the material terms” of a contest it conducts or promotes and to conduct the contest “substantially as announced and advertised.”  Material terms include, among other things, eligibility restrictions, the means of selecting winners, and the extent, nature, and value of prizes.  Prizes must also be awarded promptly, and in the past the FCC has found Contest Rule violations where a station failed to award prizes in a manner consistent with the advertised rules.

The FCC received a complaint alleging that the station did not award a cash prize to the winner of a contest conducted in October 2019.  To investigate the complaint, the FCC issued a Letter of Inquiry (LOI) to the station.  In response, the station admitted that there had been “undue delay,” with the prize being awarded after the announced timeline.  The station’s contest rules indicated prizes were to be awarded to winners “within thirty (30) business days of the date the winner completes all required Station documents.”  The station acknowledged that it received all required documentation on January 16, 2020, and thus it should have issued the prize by March 2, 2020, but did not issue the prize until May 2021.  The station cited three separate events as the cause of the undue delay: (1) difficulty accessing necessary files after the COVID-19 pandemic led to employees working from home; (2) a ransomware attack that affected corporate IT systems between October 2020 and March 2021; and (3) a lack of staff after the ransomware attack that prevented the station from completing work in a timely manner.

Despite these defenses, the FCC found that the station apparently willfully violated Section 73.1216 of the FCC’s Rules when it failed to award the prize in accordance with the advertised contest rules, and therefore failed to conduct the contest “fairly and substantially as represented to the public.”  The FCC explained that “timely fulfillment of the prize” was a “material term of the Licensee’s own contest rules” and the station delayed issuing the prize for over a year.  The FCC disagreed with the station’s justifications for the delay, finding that they did not excuse the failure to award the prize in compliance with the announced contest rules.  In particular, the FCC pointed out that the station’s first justification for the delay (the pandemic transition to work-from-home) occurred in mid-March 2020 – after the station should have already issued the prize by March 2, 2020.

The FCC’s base fine for violations pertaining to licensee-conducted contests is $4,000.  In this case, the FCC found a single violation of Section 73.1216 of the FCC’s Rules resulting from the station’s failure to issue the prize within the timeframe established by the contest rules.  However, considering the totality of the circumstances, and in line with the FCC’s Forfeiture Policy Statement, the FCC determined an upward adjustment was warranted, emphasizing that “large or highly profitable companies should expect to pay higher forfeitures for violations of the Act and the Commission’s rules” to ensure that the fine is an “effective deterrent and not simply a cost of doing business.”  The FCC therefore concluded that an upward adjustment of the proposed fine from $4,000 to $8,000 was appropriate.  The station has 30 days from release of the NAL to pay the fine or file a written statement seeking reduction or cancellation of it.

Rule Violations by Business Communications Company Result in Consent Decree with Compliance Plan and Six-Figure Penalty

A nationwide business communications company settled an FCC investigation by admitting that it failed to seek approval from the FCC before transferring control of business radio licenses and that it conducted business radio operations without authorization.  The company entered into a consent decree that requires implementation of a compliance plan and payment of a $100,000 civil penalty. 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:

  • LPTV Owner Pays $250,000 for Abusing FCC’s Licensing Processes
  • FCC Proposes $32,000 Fine for Radio EEO Violations
  • Florida Radio Station Receives $20,000 Proposed Fine for Contest Rule Violations

Abuse of FCC Licensing Processes Leads to $250,000 Penalty

The FCC entered into a Consent Decree earlier this month with an LPTV broadcaster (the “Company”) that held 80 LPTV licenses and more than 120 unbuilt LPTV construction permits, resolving an investigation into whether the Company abused the Commission’s licensing processes. The FCC was investigating whether the Company had filed a series of minor modification applications to construct and license temporary facilities with the intent of relocating stations substantial distances from their originally authorized sites to evade FCC restrictions on filing major modification applications.

In response to a Media Bureau inquiry concerning the Company’s construction and licensing practices and the operational status of its stations, the Company claimed that each licensed station was constructed in compliance with the parameters set forth in the underlying construction permit. It conceded, however, that it had installed temporary transmission equipment that was later removed, and that the stations were never built to provide permanent television service. The FCC recognized that in some instances, the temporary equipment was installed because pandemic-related supply chain issues made it difficult for the Company to obtain equipment. However, the FCC found that at least 30 stations were constructed with temporary equipment as a way to effectuate a series of repeated, short moves with the ultimate goal of moving the stations a large distance – sometimes over 100 miles from the location listed in the initial construction permit.

Under Section 74.787(b) of the FCC’s Rules, any change in an LPTV’s antenna location greater than 30 miles, or a move where the proposed protected contour does not overlap some portion of the protected contour of the existing station, is considered a major change requiring the permittee/licensee to file a major modification application. Major modification applications in the LPTV service are currently frozen and may only be filed upon the opening of a filing window. The FCC has held that the filing of any facility application implies that the applicant is “ready, willing, and able” to construct and operate the facility as proposed. When determining whether a permittee has engaged in an abuse of process based on serial minor modification applications, the FCC looks at several factors, including (1) the nature of the broadcast facilities (i.e., temporary construction); (2) the duration of operations; (3) the purpose of the relocations; and (4) any pattern of relocations.

The FCC explained that the Company undertook the series of short moves by: (1) filing an application for minor modification to relocate the station within 30 miles of its licensed site; (2) building temporary facilities upon grant of the minor modification application with no intent to provide permanent service at the new location; (3) filing a license to cover the temporary location and then applying for special temporary authority to go silent once the license was granted; and (4) removing the equipment from the site and filing for a new minor modification to move the station up to 30 miles again. The Company would repeat this process until the station was moved from a rural unserved or underserved area with low population density to a densely populated urban or suburban area.

While the FCC accepted that some stations were built with temporary facilities due to difficulty obtaining equipment, it found that at least 30 stations were constructed with temporary facilities and operated only a short time. The FCC believed the Company lacked intent to use those facilities to provide a permanent television program service to viewers, and that their plan was instead to undertake a pattern of relocating the stations as a way of circumventing the major change rule and the freeze on major modification applications.

In agreeing to the Consent Decree, the Company admitted that its actions violated the FCC’s rules and agreed to pay a $250,000 penalty along with implementing a comprehensive compliance program. It also agreed to surrender authorizations for nearly a hundred LPTV stations. Due to delays resulting from the investigation as well as supply chain delays, the FCC agreed to toll the construction permit expiration dates for certain of the Company’s other stations for four months, but required that the Company commence operation of all licensed and silent facilities within one year of going silent.

Radio Stations Receive Proposed Fine of $32,000 for EEO Violations

The FCC proposed a $32,000 fine against the licensee of a number of Georgia radio stations for failing to timely upload an Annual EEO Public File Report to the stations’ Public Inspection Files, failing to timely upload the Report to the stations’ websites and, based on those failures, failing to analyze its EEO program.

Section 73.2080(c)(6) of the FCC’s Rules requires every non-exempt broadcast station to prepare and place an Annual EEO Public File Report in its Public Inspection File and on its website, if it has one. The Annual EEO Public File Report contains information regarding a station employment unit’s full-time vacancies during the preceding year, the recruitment sources used to fill those vacancies, the referral source for each of the resulting hires, the total number of interviewees grouped by referral source, and a description of the station’s recruitment initiatives not connected to specific vacancies. Separately, Section 73.2080(c)(3) of the FCC’s Rules requires a licensee to analyze its EEO recruitment program on an ongoing basis to ensure it is achieving broad outreach to potential applicants.

In a recent license renewal application, the broadcaster disclosed that it had not uploaded its 2018 Annual EEO Public File Report to the stations’ Public Inspection Files by the applicable deadline. The Enforcement Bureau issued a Letter of Inquiry in July 2020 and the broadcaster responded, acknowledging that the report was uploaded over nine months late and citing an “administrative change” and loss of a former employee as the reason. Finding that such circumstances do not excuse or nullify a rule violation, the FCC concluded that the licensee violated Section 73.2080(c)(6) of the FCC’s Rules in two different ways: (1) by failing to timely upload the report to the Public Inspection Files of the stations, and (2) by failing to timely upload it to the stations’ websites. The Commission found that failure to timely upload the report denied the public of the ability to participate in monitoring and providing input on the stations’ EEO programs, thereby preventing the stations from analyzing their recruitment program and thus also violating Section 73.2080(c)(3) of the FCC’s Rules.

Section 503(b)(2)(A) of the Communications Act allows the FCC to assess a fine of up to $55,052 per day of a continuing violation, up to a maximum of $550,531 for a single act. When determining the amount of a fine, the FCC considers the “nature, circumstances, extent, and gravity of the violation” as well as the violator’s history of any prior offenses and its ability to pay. The FCC’s base fine for a Public Inspection File violation is $10,000. Here, the FCC noted the broadcaster’s large number of stations across the country, the large number of people it employs, how routinely it fills job openings, and its prior history of both EEO and non-EEO rule violations. In light of these factors, the FCC proposed a $26,000 fine for the failure to prepare and upload the report.

Because there is not an established base fine for failing to analyze a station’s EEO program, the FCC looked to prior Notices of Apparently Liability (NAL) issued to the broadcaster in 2008 and 2017 for various EEO rule violations. In both NALs, the FCC proposed a $2,000 fine. Considering the prior history of EEO offenses, the FCC felt an upward adjustment was warranted and issued a $6,000 fine for the failure to analyze the stations’ EEO program. In total, the FCC proposed a $32,000 fine. The broadcaster has 30 days from release of the NAL to pay the fine or file a written statement seeking reduction or cancellation of it.

FCC Fines Florida Radio Station for Contest Rule Violations

The FCC proposed a fine of $20,000 against the licensee of a Florida radio station for apparent violations of the Commission’s contest rules. Specifically, the FCC found that the licensee apparently failed to fully disclose material contest terms, to conduct the contest as advertised, and to maintain the contest’s rules on the station’s website for at least 30 days after the end of the contest.

Section 73.1216 of the FCC’s Rules requires a licensee to “fully and accurately disclose the material terms” of a contest it broadcasts or promotes and to conduct the contest “substantially as announced and advertised.”  Material terms may be disclosed by either airing those terms or making them available in writing on a publicly accessible website. If the latter, the contest rules must stay on the website for at least 30 days after the contest ends. Material terms include, among other things, eligibility restrictions and the means of selecting winners. Contest rules that are ambiguous or open to interpretation are susceptible to an FCC finding that the station failed to disclose the material terms.

The Enforcement Bureau received a complaint from a person alleging they had been incorrectly excluded from a contest and that the radio station had violated its contest rules. The complainant had won a different station-run contest on March 1, 2019 and attempted to enter the contest at issue in the complaint on May 30, 2019. A station employee applied a “90-day lockout” on prior winners and excluded the complainant. The written contest rules, however, specified that only persons who had won a contest in the prior 30 days were to be excluded.

In response to an FCC Letter of Inquiry, the station admitted that, as a result of human error, it did not conduct the contest “in strict compliance with the written rules” when its employee applied the incorrect eligibility exclusion to the complainant. The station also admitted that it took the rules off the website the day the contest ended, rather than leaving the rules up for 30 days as required. However, the station contended that the complaint was not material because the contest rules not only excluded persons who had won a prize in the 30 days prior to the January 7, 2019 start of the contest, but also excluded anyone who won a prize while the contest was ongoing.

The FCC disagreed, finding that the station’s application of its contest rules was not supported by the plain language of its rules or its standard screening protocol. The FCC noted that even if the contest rules could be interpreted as the station claimed they should be, FCC precedent makes clear that ambiguous rules are to be “construed against the interests of the promoter of the contest.” Further, the FCC clarified that regardless of the complainant’s eligibility to participate in the contest, the complaint was not “immaterial” because a person does not need to be a qualified contestant to have standing to bring a contest rules complaint at the FCC regarding the manner in which a contest was conducted.

The FCC’s base fine for each “violation of requirements pertaining to broadcasting of lotteries or contests” is $4,000. In this case, the FCC noted that it may adjust the proposed fine upward for “violations that are egregious, intentional, or repeated, or that cause substantial harm or generate substantial economic gain for the violator.” Considering the totality of the circumstances, the FCC determined an upward adjustment was warranted, explaining that the licensee’s owner had a history of contest rule violations, and that the station also failed to maintain the rules on its website for the required 30 days after the end of the contest. As a result, the FCC proposed a total fine of $20,000. The station has 30 days from release of the NAL to pay the fine or file a written statement seeking reduction or cancellation of it.

A PDF version of this article can be found at FCC Enforcement ~ March 2022.

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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:

  • Texas Wholesaler Fined $22,000 for Using Signal Jamming Device
  • Florida Broadcaster Hit with $125,000 Penalty Over Allegations of Antenna Lighting and Contest Rule Violations
  • FCC Announces Pirate Radio Enforcement Will Target Property Owners and Managers

Texas Wholesale Company in a Jam: Illegal Signal Blocking Device Leads to $22,000 Fine

In a recent Memorandum Opinion and Order, the FCC upheld a $22,000 fine against a consumer goods wholesaler based in Dallas for operating a prohibited cellular signal blocking device, referred to as a signal jammer.

Signal blocking devices can significantly disrupt emergency calling capabilities, and consumer communications more generally, and are therefore banned under the Communications Act and FCC rules.  Section 301 of the Communications Act prohibits radio transmissions without prior FCC authorization, and Section 333 prohibits willful or malicious interference with any licensed or authorized radio communications.  Additionally, Section 302(b) prohibits the manufacture, import, sale, shipment, or use of devices capable of causing harmful interference to authorized radio communications.  Sections 2.805 and 15.1(c) of the FCC’s Rules, implementing Section 302(b), require radio frequency devices to be authorized by the FCC before operation.

In response to a complaint from a cellular company, FCC investigators made an on-site visit in April 2017 to examine interference issues reportedly caused by a signal jammer.  The cellular company claimed that the jammer was likely located on the premises of a Dallas-area wholesale business that, according to the company, had a history of causing interference from the use of signal jammers.  When the investigators arrived, however, they found no jamming device in use.  In discussions with the investigator, the wholesale business owner admitted to operating a signal jammer to prevent employees from using their mobile phones while at work, acknowledged that in February 2017 a representative of the cellular company had warned the wholesaler against using such devices, and claimed that the device had been discarded prior to the investigator’s arrival.  The owner refused to relinquish the device and instead offered to sell the signal jammer to the investigator.   After declining the offer, the investigator issued a Notice of Unlicensed Radio Operation, informing the wholesaler that the use of a signal jammer is illegal.

In July 2017, the Enforcement Bureau issued a Notice of Apparent Liability (NAL) and proposed a $22,000 fine against the wholesaler for use of a signal jamming device.  The wholesaler responded to the NAL, denying that the investigator asked the owner to retrieve the device from the trash, and arguing that the Bureau misapplied the law in calculating the proposed fine amount.  The Bureau considered and rejected the wholesaler’s arguments and imposed the $22,000 fine.

In May 2018, the wholesaler filed a Petition for Reconsideration challenging the fine, citing its history of compliance and offer to surrender the device, and denying that the owner offered to sell the jammer to the investigator.  In the recent Memorandum Opinion and Order, the Bureau again considered and rejected the wholesaler’s arguments.  Applying its procedural rules, the Bureau noted that the Petition raised new facts and arguments that could have been raised in response to the NAL, and therefore dismissed them as procedurally barred, denying the request for a reduction of the fine.  The Bureau also noted that, even if it were to consider the new facts and arguments presented, it would dismiss the arguments on the merits due to the lack of any compliance history with the FCC as a non-license/authorization holder, insufficient evidence regarding relinquishment of the jamming device, and conflicting statements regarding the offer to sell the jamming device to the investigator.  The wholesale company now has 30 days from the release of the Memorandum Opinion and Order to pay the full $22,000 fine.

Florida FM Broadcaster’s Tower Lighting and Contest Rule Troubles Lead to $125,000 Penalty

The Enforcement Bureau entered into a Consent Decree with the licensee of Panama City and Tallahassee-area FM stations to resolve two investigations into contest and tower lighting violations.

The Communications Act and FCC rules regulate on-air contests conducted by television and radio stations to protect the public against misleading and deceptive practices.  Section 73.1216 of the FCC’s Rules provides that a licensee must “fully and accurately disclose the material terms” of a contest it broadcasts, and conduct the contest “substantially as announced and advertised.”  Under Section 73.1208, broadcasters must disclose if program material was previously taped, filmed, or recorded where “time is of special significance,” or “an affirmative attempt is made to create the impression that it is occurring simultaneously with the broadcast.”

Part 17 of the FCC’s Rules, along with Federal Aviation Administration (FAA) regulations, set forth monitoring and notice obligations regarding tower lighting systems.  The rules require the owner of an antenna structure to immediately notify the FAA of any lighting outages or other lighting malfunctions.  Tower owners must also notify the FCC within 5 days of any change to the tower’s height or ownership. 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 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:

Headlines:

  • Alabama FM Licensee Admits to On-Air Contest and Unauthorized Transfer of Control Violations
  • Silicon Valley Start-Up Agrees to Pay $900,000 Penalty for Unauthorized Satellite Launches
  • Michigan AM Licensee Faces Proposed $18,000 Fine and Reduced License Term for a Variety of Violations

No-Win Situation: FM Licensee Settles with FCC Over On-Air Contest and Unauthorized Transfer of Control Violations

The FCC’s Enforcement Bureau entered into a Consent Decree with the licensee of an Alabama FM radio station for violating the FCC’s rules governing on-air contests and transfers of control.

The FCC regulates licensee-conducted contests in order to protect the public against deceptive and misleading practices.  Section 508 of the Communications Act (“Act”) prohibits a licensee from knowingly deceiving the public by manipulating or predetermining the results of a contest.  Section 73.1216(a) of the FCC’s Rules requires a licensee to “fully and accurately disclose the material terms of the contest” and the contest must be conducted in accordance with those announced terms.

Section 310 of the Act and Section 73.3540 of the FCC’s Rules prohibit the transfer of control of a broadcast license without prior FCC approval.  A de facto transfer occurs when a licensee no longer retains ultimate control over vital aspects of a station’s operations, including its programming, personnel, and finances.

In August 2016, the FCC received a complaint alleging that the licensee “prematurely ended” an on-air contest and failed to award the advertised prizes. According to the complaint, the station instead kept the prizes and provided them to its own employee.

The Enforcement Bureau responded nearly a year later by issuing a Letter of Inquiry (“LOI”) to the licensee seeking information about the contest. In its response, the licensee denied any knowledge of the contest nor was it was able to find any records related to the contest.  According to the Consent Decree, the licensee’s professed lack of knowledge about the contest “raised questions about the Licensee’s control over the Station.”  As a result, in July 2018, the Enforcement Bureau issued a supplemental LOI to the licensee investigating the apparent de facto unauthorized transfer of control to the third party that conducted the contest, who had a time brokerage agreement with the station.  According to the FCC, it had not approved, nor had the licensee applied for, a transfer of control of the license.

To resolve the FCC’s investigation, the licensee entered into a Consent Decree with the Enforcement Bureau.  Under the terms of the Consent Decree, the licensee agreed to (1) admit liability for violations of the FCC’s contest and unauthorized transfer of control rules; (2) pay a $12,000 civil penalty; and (3) develop and implement a compliance plan to prevent further violations of the FCC’s Rules.

Space Oddity: Start-Up Agrees to Pay $900,000 to Settle Investigation into Unauthorized Satellite Operations

After a bizarre string of events involving unauthorized communications satellites, space launches from India, and experimental weather balloons over California, the FCC entered into a Consent Decree with a Silicon Valley satellite start-up.

Section 301 of the Act and Section 25.102 of the FCC’s Rules prohibit the operation of any device for the transmission of energy, communications, or signals by space or earth stations unless in accordance with an FCC authorization.  Section 25.113 of the FCC’s Rules requires FCC authorization before deployment and operation of a space satellite. Continue reading →

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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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[UPDATE:  The FCC just released its Report and Order defining the requirements for stations wishing to meet their contest disclosure obligations by posting their contest rules online.  The revised FCC rule requires a licensee to (i) broadcast the relevant website address periodically with information making it easy for a consumer to find the material contest terms online; (ii) establish a link or tab to material contest terms on the website’s home page; (iii) maintain contest terms online for a minimum of thirty days after the contest ends; and (iv) where applicable, within 24 hours of a material change in contest rules (and periodically thereafter), announce that the material terms have changed and direct participants to the website to see the changes. 

The FCC also noted that the “relevant website” for posting rules should be the station’s or licensee’s website or, if there is no station or licensee website, then any other website that is “designed to be accessible to the public 24/7, for free, and without any registration requirement.”

In the Report and Order, the FCC agreed with commenters that a literal interpretation of the “complete and direct” website announcement requirement would be unduly burdensome for broadcasters and confusing to the public.  It therefore concluded that broadcasters could satisfy the requirement by identifying the relevant address “through simple instructions or natural language (e.g., ‘for contest rules go to kxyz.com and then click on the contest tab’).”

The Report and Order did not, however, shine any light on how frequently a broadcaster must announce the web address.  Instead, the FCC decided that “the public interest would be better served by providing licensees with flexibility to determine the frequency with which they broadcast the website address where contest terms are made available to the public.”  The FCC cautioned, however, that if it finds “that licensees are failing to broadcast the website address with adequate frequency,” the Commission will revisit the issue in the future.]

[EARLIER POST BELOW]

As we wrote last month, the agenda for the FCC’s September open meeting included consideration of its proposal to modernize the 40-year-old broadcast contest rule. Today, after more than three and a half years of (unopposed) anticipation, the FCC adopted rules that “allow broadcasters to disclose contest rules online as an alternative to broadcasting them over the air.”

As the FCC has not released the text of its decision yet, the precise form of disclosure that will be required is not fully known.  However, it appears the FCC did hear the suggestions made by numerous commenters regarding how often a station must air the web address for contest rules. The FCC’s original proposal would have required that the online location of the full contest rules be mentioned every time the contest itself is mentioned.  Numerous parties complained that such an approach would clutter the airwaves with repetitive mentions of the website address where the rules could be found, and would be of little use to a public well-attuned to finding information on the Internet.

Today’s Public Notice hints that less frequent website mentions will be adequate, stating that broadcasters will be required only to “periodically announce over the air the website address where their contest rules can be found.”  Once the text of the rules is released, broadcasters will learn if the FCC has provided any guidance as to how often a “periodic” announcement must run.

Also left open until the text of today’s decision arrives is the issue of whether the FCC will stick with its original proposal that “the complete and direct” website address (e.g., “http://www.WXYZ.com/contest123/rules”) be aired, or if broadcasters will instead be allowed to use a shorter web address, such as the station’s main website, where a link to the contest rules can be found.  In either case, we would expect the FCC will require that a link to the contest rules be featured prominently on a station’s website.

While today’s action still permits broadcast stations to comply with the rules by airing the material terms of a contest on-air, it opens up an additional option that many stations will prefer to use, if for no other reason than to put an end to debates at the FCC about whether what a station aired constituted the “material terms” of a contest’s rules.  That has been a major subject of FCC enforcement decisions related to station-conducted contests, and one that should go away if the station has posted the full contest rules online.  As a result, the main focus of any FCC investigation involving a station contest will likely be limited to whether the station followed its published rules in conducting its contest.  That is a far more objective question, and should eliminate some of the risk that has been inherent in running a station contest for the past 40 years.

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As we wrote last month, the agenda for the FCC’s September open meeting included consideration of its proposal to modernize the 40-year-old broadcast contest rule. Today, after more than three and a half years of (unopposed) anticipation, the FCC adopted rules that “allow broadcasters to disclose contest rules online as an alternative to broadcasting them over the air.”

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