Articles Posted in Sponsorship ID & Payola/Plugola

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The Federal Communications Commission (FCC) last week released a highly anticipated Notice of Proposed Rulemaking (NPRM) seeking comment on proposed disclosure requirements for political ads containing AI-generated content.  The item was adopted earlier this month by a 3-2 party-line vote, nearly two months after FCC Chairwoman Rosenworcel first announced its circulation among the commissioners for consideration.

As discussed in more detail below, the proposed rule would require radio and TV broadcasters to (1) inquire of any person making a request to buy airtime for political advertising whether the ad contains AI-generated content; (2) make on-air disclosures of AI use with regard to political ads containing AI-generated content immediately before or during their airing; and (3) include a disclosure of AI use in the station’s Political File records for each such ad buy.  While this post focuses on the NPRM’s broadcast-specific proposals, we note that it proposes similar obligations for cable operators, Direct Broadcast Satellite providers, and Satellite Digital Audio Radio Service licensees engaged in program origination, as well as for Section 325 permit holders (those authorized to export programming for transmission back into the United States).

Aware that such rules might conflict with similar efforts by states and other federal agencies, the NPRM characterizes the proposed disclosure requirements as a “complement” to efforts to regulate AI in political advertising that are underway in various states and at the Federal Election Commission (FEC), which we wrote about here and here.  However, FEC Chairman Sean Cooksey made his contrary views clear in a letter last month to FCC Chairwoman Rosenworcel in which he stated that the FEC has exclusive jurisdiction in this area and “the FCC lacks legal authority to promulgate conflicting disclaimer requirements only for political communications.”

The proposal would require broadcasters to do the following:

Duty of Inquiry:  Broadcasters would need to inform each political advertiser, at the time the station agrees to air a political ad, of the requirement that stations must air a disclosure for any ad that includes AI-generated content and then inquire of the buyer as to whether the ad includes such content.  While styled as a “simple inquiry,” the NPRM acknowledges various challenges that are likely to arise.  It seeks comments on how to deal with such situations, including, for example, where a station is working with a media placement agency that had no role in the creation of the ad and which may not know whether it includes AI-generated content, or the station receives political content from a network or syndicator and has no direct contact with the advertiser.

On-Air Disclosure:  A broadcast station that receives a candidate or issue ad containing AI-generated content would need to air a disclosure immediately before or during the ad to inform viewers of the ad’s use of AI.  The proposal contemplates and seeks comment on the following standardized language for the disclosure: “[The following]/[this] message contains information generated in whole or in part by artificial intelligence.”  Once again, the NPRM acknowledges there are challenges broadcasters will face in complying with the proposed rule.  These include (a) what should a station do if it has received no response to its inquiry about AI use; (b) what should a station do if it was told by the person or entity buying the time that an ad contains no AI-generated content and is later informed by a credible third party that the ad does include AI-generated content (and who should qualify as a “credible third party?”); and (c) what should a station do when it receives political programming through a network and lacks any information from the advertiser on AI use as well as the ability to insert a disclosure in network-delivered programming?  The NPRM seeks comment on these and many other issues that may affect a station’s ability to comply with the proposed disclosure requirement.

Online Disclosure: Adding yet more to the burden on broadcasters, the NPRM proposes requiring broadcasters to include in their online Political Files the following written disclosure for each political ad containing AI-generated content: “This message contains information generated in whole or in part by artificial intelligence.”

Because of the FCC’s limited jurisdiction, the proposed rules would apply only to certain FCC-regulated entities, doing nothing to address the use of AI in political ads that voters see and hear on social media or elsewhere.  As a result, it would impose a significant burden on regulated entities while leaving unregulated entities like social media—the primary source of deceptive political information—completely unregulated.  This would incentivize advertisers to put their AI ads on any media other than radio and TV, both because of their desire not to include disclosures and the added bureaucracy/delay involved in the multi-step process stations would need to follow with advertisers to determine if a disclosure is needed (and the added time needed to then insert such a disclosure). 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:

  • Sponsorship ID Violations Lead to Consent Decree With $60,000 Payment
  • Unauthorized Station Transfers and Silent Stations Result in $25,000 Civil Penalty and Compliance Plan
  • Retailer Fined More Than $685,000 for Marketing Unauthorized Wireless Microphones

LPTV Station Fails to Identify Programming as Sponsored, Enters Into $60,000 Consent Decree

The licensee of an Arkansas low power TV station entered into a consent decree with the FCC’s Media Bureau, agreeing to pay a $60,000 penalty for violating sponsorship identification laws.

Broadcast stations are required under federal law (47 U.S.C. § 317(a)(1) and 47 C.F.R. § 73.1212) to identify the sponsor of any program the station has been paid to air.  This requirement applies to advertising, music and any other broadcast content.  The FCC has said that the sponsorship identification laws are “grounded in the principle that listeners and viewers are entitled to know who seeks to persuade them . . . .”  Those who lived through the 1950s and 1960s or who followed the payola/plugola scandals of those decades may recall that the principal issue wasn’t the pay-to-play scheme itself, but rather disc jockeys’ failure to disclose to listeners that something of value had been given in exchange for playing a record.

In this case, in an effort to increase station revenue, an LPTV station urged political candidates to buy advertising packages.  However, the packages being sold by the station included appearances for the candidate on the station’s daily news and public affairs program.  Multiple candidates bought these packages and were subsequently interviewed live on the air.  The station failed to disclose to its viewers that the interviewees were not chosen for their newsworthiness, but instead were interviewed merely because the station had been paid.  While stations may conduct paid interviews, under the sponsorship identification laws, viewers/listeners must be told on-air that the station was paid to air the content, and the station must identify the sponsor.

Along with political candidates, the station accepted payments to interview spokespeople for several commercial entities on the program.  In both cases, that station failed to disclose that the content was sponsored and by whom.  The Media Bureau noted that these undisclosed appearances on a news and public affairs program misled the public into thinking that the interviewees were selected based on their newsworthiness and the station’s editorial judgment.

To resolve the FCC’s investigation, the station entered into a Consent Decree.  Along with paying a $60,000 monetary penalty, the station must implement a compliance plan overseen by a compliance officer that includes written procedures, a compliance manual, and a training program for employees designed to prevent future violations of the sponsorship identification laws.  The license must also file compliance reports with the FCC annually for the next five years, and must notify the FCC within 15 days of discovering any future violation of the sponsorship identification rules.

Family of Deceased Radio Owner Fails to File Necessary Transfer Applications, Agrees to Consent Decree With $25,000 Penalty

The family of a deceased radio owner failed to file the necessary FCC applications to transfer the owner’s stations after his death and also failed to timely request authority for two stations to be silent.  These violations resulted in a Consent Decree with the FCC’s Media Bureau requiring payment of a $25,000 penalty.

On January 13, 2021, the controlling shareholder of a number of radio licensees passed away.  Under Section 310(d) of the Communications Act and Sections 73.3540 and 7.3541 of the FCC’s transfer of control rules, involuntary transfer of control applications should have been filed within 30 days of the controlling shareholder’s passing.  Those applications must apprise the FCC of the facts surrounding the involuntary transfer, and seek Commission consent to the transfer of control of the licenses from, for example, the decedent to the decedent’s estate/executor.  Once the FCC approves the involuntary transfer, there will typically be a second set of applications to transfer the licenses out of the estate to the party inheriting the stations (or sometimes to a party buying the stations directly from the estate).

Here, the stations were also later placed into trusts created two months after the controlling shareholder’s death, but applications seeking FCC approval were not filed until several months after that.  During that time, the former controlling shareholder’s son became the sole trustee of the trusts and assumed de facto control of the licensees and their radio licenses without having obtained the additional FCC approvals to do so.

Unrelated to these transfer issues, the license renewal applications for an AM station and FM translator formerly controlled by the deceased owner disclosed that the stations were off the air without FCC authorization.  In the case of the AM station, special temporary authority (“STA”) to remain silent was not requested until two months after a previous STA to be silent had expired.  With regard to the FM translator, it was silent for seven months before the licensee requested special temporary authority for it to be silent.

Under Section 73.1740(a)(4) (full power stations) and Section 74.1263(c) (FM translators) of the FCC’s Rules, licensees must notify the FCC within 10 days of a station going silent if it does not return to the air within that time.  If that silence is expected to last more than 30 days, the licensee must obtain FCC authorization to be silent for longer than 30 days.  Even where a station has received permission to remain silent for the maximum duration of an STA (six months), the licensee must seek renewal of that authorization every six months thereafter if the station continues to be silent.  Absent a special finding by the FCC preventing it, the license of a station that has been silent for more than 12 consecutive months (even with the required STAs in place) automatically expires under Section 312(g) of the Communications Act.

To conclude the FCC’s investigation of the alleged violations, the licensees agreed to enter into a Consent Decree.  Under the terms of the Decree, the licensees must pay a civil penalty of $25,000 and appoint a compliance officer to implement and administer a compliance plan.  The compliance plan must include a compliance manual and training program to prevent future violations.  The licensees must also submit a compliance report within 90 days, and then submit annual compliance reports for the next three years.

FCC Fines New York Retailer $685,338 for Marketing Noncompliant or Unauthorized  Wireless Microphones

The FCC recently fined a wireless microphone retailer $685,338 after years of warning the company to obtain proper FCC authorizations for the wireless microphones it was selling.  As we discussed in 2020, the FCC previously proposed the fine, asserting that the retailer had advertised 32 models of wireless microphones that did not comply with the Communications Act or the FCC’s equipment marketing rules.

Section 302(b) of the Communications Act prohibits, among other things, the sale or offering for sale of devices that fail to comply with the FCC’s radiofrequency (“RF”) equipment authorization regulations.  Similarly, Section 2.803(b) of the FCC’s Rules prohibits, with limited exceptions, the marketing of an RF device unless the device has first been properly authorized, identified, and labeled in accordance with the FCC’s Rules.  Section 74.851(f) of the FCC’s Rules requires devices emitting radiofrequency energy (such as wireless microphones) to be authorized in accordance with the FCC’s certification procedures to prevent interference before they can be marketed in the United States.  As detailed in Pillsbury’s Primer on FCC Radio Frequency Device Equipment Authorization Rules, equipment authorization procedures differ depending on the type of equipment involved.

The Commission initially cited the company in 2011 (the “2011 Marketing Citation”) for marketing wireless microphones that did not comply with the FCC’s equipment marketing rules.    Despite this citation, the retailer continued to market noncompliant microphones.  In response to a 2016 complaint alleging the company was still marketing noncompliant microphones, the FCC issued a Letter of Inquiry (“LOI”) in 2017.  This prompted a years-long investigation, during which the retailer never provided complete answers regarding the authorization status of its microphones.  In many cases, the FCC ID numbers provided by the retailer did not match the microphone’s advertised descriptions and/or claimed operating frequencies.

The FCC then issued another LOI in 2019 asking for (i) the actual frequencies, (ii) the FCC IDs, and (iii) the authorized frequencies for 82 wireless microphone models that were available for sale on the retailer’s website.  The retailer only provided answers for some of the wireless microphones.  The FCC determined that 32 of the 82 microphone models advertised for sale were not properly authorized and issued a Notice of Apparent Liability for Forfeiture in April 2020 (the “2020 NAL”) proposing a $685,338 fine.

In the 2020 NAL, the FCC found that the retailer apparently willfully and repeatedly violated Section 302 of the Communications Act and Sections 2.803 and 74.851 of the Commission’s Rules when it marketed 32 models of wireless microphones that were noncompliant or unauthorized.  The FCC also proposed a significant upward adjustment of the total “base fine” for such violations due to the retailer’s long record of repeated and continuous marketing violations and the egregious nature of the violations, specifically noting that the retailer marketed two microphones that apparently operated in the aviation band and thus had the potential to cause harmful interference to a critical public safety radio service.

The retailer responded to the 2020 NAL on July 10, 2020.  First, it asserted that the 2020 NAL should be cancelled because it did not prove a violation occurred, and it claimed that screenshots of its website showing prices and a shopping cart do not prove that a specific microphone was available for purchase.  The retailer also argued that to prove a violation, the FCC must show that the retailer had “the intention or ability to sell or lease” the microphones.  The FCC reasoned that a website containing images, descriptions, prices, the word “shop” and a shopping cart, and an “add to cart” function clearly indicated the products were advertised for sale.  The FCC further noted that the actual sale of an unauthorized device is not necessary to prove a marketing violation, and a website with thorough descriptions and pictures of the microphones is a clear indication that the retailer was marketing the microphones to the public.

Second, the retailer claimed the 2011 Marketing Citation provided insufficient and stale notice to support the 2020 NAL.  In many cases, entities that violate a rule and do not hold an FCC authorization or license are entitled to a non-monetary citation before an NAL can be issued, but the FCC pointed out that there is no expiration date for a citation, and the 2017 LOI followed by the 2020 NAL kept the retailer on notice that the FCC was continuing to investigate.  The FCC also rejected the claim that the rules cited in the Marketing Citation did not match the rules cited in the 2020 NAL, noting that the difference in the rule numbers was due to that rule section being reordered in 2013.

Third, the retailer argued that the proposed fine should be lowered because some microphones were authorized or should be grouped together and considered one model.  The FCC rejected this argument, noting the company did not provide any technical documentation to prove the devices were identical and should be grouped together.  The FCC also rejected the argument that some of the microphones had not been sold for more than a year prior to the 2020 NAL, explaining that a model does not have to be sold to be marketed.  The FCC also rejected the argument that some of the models were actually authorized, instead showing that the frequencies authorized under the FCC ID for a particular model did not match the frequencies provided by the retailer in its 2020 NAL response.

Finally, the retailer claimed that the upward adjustments were excessive and unwarranted.  The retailer argued that the fines for the microphones capable of operating in the aviation band should be eliminated or reduced because it was not proven that the models in fact operated in the aviation band.  However, the FCC pointed out that the retailer never actually stated that the two models were not capable of operating in the aviation band and had not provided information to show the devices could not operate in that band.  The retailer also claimed that there was no evidence of a continuing violation to support the upward adjustment.  The FCC reaffirmed its conclusion that the facts supported an upward adjustment, noting that the 2011 Marketing Citation and the 2020 NAL both showed noncompliant wireless microphones being marketed on the retailer’s websites.  In addition, the FCC rejected the retailer’s argument that it did not understand the FCC’s inquiries because it is not involved in the communications business.  The FCC explained that the retailer received multiple citations and communications from the FCC and any continued ignorance of the law did not excuse or mitigate the violations.  The Commission also noted that the retailer’s website continues to show many of the models at issue – a clear indication the company had no intent of complying with the FCC’s Rules.

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

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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:

  • Big-4 Network, Among Others, Settles With FCC Over Emergency Alert Tone Violations
  • Despite Self-Disclosure, Sponsorship ID Violations Land $233,000 Proposed Fine
  • Topeka TV Licensee Enters Into Consent Decree Over Late-Filed KidVid Reports

False Alarm: FCC Enters Into Multiple Consent Decrees Over Emergency Alert Tone Violations

In a single day last week, the FCC announced four separate Consent Decrees in response to unauthorized uses of the Emergency Alert System (“EAS”) tone across various media outlets.  The parent companies of a Big-4 broadcast network and two cable channels, as well as the licensee of two southern California FM stations, each agreed to significant payments to settle investigations into violations of the FCC’s EAS rules.  According to the Consent Decrees, unauthorized emergency tones have reached hundreds of millions of Americans in the past two years alone.

The Emergency Alert System is a nationwide warning system operated by the FCC and the Federal Emergency Management Agency that allows authorized public agencies to alert the public about urgent situations, including natural disasters and other incidents that require immediate attention.  Once the system is activated, television and radio broadcasters, cable television operators, and other EAS “participants” begin transmitting emergency messages with distinct attention tones.  These tones consist of coded signals that are embedded with information about the emergency and are capable of activating emergency equipment.  Wireless Emergency Alerts (“WEA”), which deliver messages to the public via mobile phones and other wireless devices, also use attention signals.

Emergency tones may not be transmitted except in cases of: (1) actual emergencies; (2) official tests of the emergency system; and (3) authorized public service announcements.  In an accompanying Enforcement Advisory published on the same day as the Consent Decrees, the FCC’s Enforcement Bureau noted that wrongful use of the tones can result in false activations of the EAS, as well as “alert fatigue,” in which “the public becomes desensitized to the alerts, leading people to ignore potentially life-saving warnings and information.”

For the Big-4 network, it all started with a joke.  Around the time of last year’s nationwide EAS test, a late-night network talk show parodied the test in a sketch that incorporated emergency tones.  According to the Consent Decree, the network’s programming reaches almost all US television households through hundreds of local television affiliates, as well as through the network’s owned and operated stations.  Shortly after the episode aired, the company removed the offending portions of the program from its website and other streaming sites and did not rebroadcast the episode.  Despite these remedial actions, the damage was already done; in response to the Enforcement Bureau’s investigation, the network’s parent company agreed to pay a $395,000 “civil penalty.”

The parent companies of two major cable channels entered into similar agreements.  In one instance from this past year, an episode of a popular show set in a zombie-infested post-apocalyptic world used simulated EAS tones on multiple occasions over the course of an hour.  That episode was transmitted on eight separate occasions over a two-month period.  According to the Consent Decree, within weeks of the episode’s debut, the Enforcement Bureau reached out to the network regarding the unauthorized uses of the tone and, after a brief investigation, the network’s parent company agreed to pay $104,000 to resolve the matter. Continue reading →

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

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

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

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

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

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

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

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

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

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

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

Brooklyn Bitcoin Mining Operation Draws FCC Ire Over Harmful Interference

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

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

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

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

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

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

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

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

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

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

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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:

  • Sponsorship Identification Violation Yields $115,000 Civil Penalty
  • $13,000 Increase in Fine Upheld for Deliberate and Continued Operation at Unauthorized Location
  • FCC Reduces $14,000 Fine for EAS and Power Violations Due to Inability to Pay

FCC Adopts Consent Decree Requiring Licensee to Pay $115,000 Civil Penalty

Earlier this month, the FCC’s Enforcement Bureau entered into a Consent Decree with a Nevada TV station terminating an investigation into violations of the FCC’s sponsorship identification rule.

The FCC’s sponsorship identification rule requires broadcast stations to identify the sponsor of content aired whenever any “money, service, or other valuable consideration” is paid or promised to the station for the broadcast. The FCC has explained that the rule is rooted in the idea that the broadcast audience is “entitled to know who seeks to persuade them.”

In 2009, the FCC received a complaint alleging that an advertising agency in Las Vegas offered to buy air time for commercials if broadcast stations aired news-like programming about automobile liquidation sales events at dealerships. The FCC investigated the complaint and found that the licensee’s TV station accepted payment to air “Special Reports” about the liquidation sales. The “Special Reports” resembled news reports, and featured a station employee playing the role of a television reporter questioning representatives of the dealership about their ongoing sales event.

The licensee acknowledged the applicability of the sponsorship identification rule to the “Special Reports,” but asserted that the context made clear their nature as paid advertisements despite the absence of an explicit announcement. The FCC disagreed, contending that the licensee failed to air required sponsorship announcements for twenty-seven “Special Reports” broadcast by the station from May through August of 2009.

As part of the Consent Decree, the licensee admitted to violating the FCC’s sponsorship identification rule and agreed to (i) pay a civil penalty of $115,000; (ii) develop and implement a Compliance Plan to prevent future violations; and (iii) file Compliance Reports with the FCC annually for the next three years.

FCC Finds That Corrective Actions and Staffing Problems Do Not Merit Reduction of Fine

The FCC imposed a $25,000 fine against a Colorado radio licensee for operating three studio-transmitter links (“STL”) from a location not authorized by their respective FCC licenses.

Section 301 of the Communications Act prohibits the use or operation of any apparatus for the transmission of communications signals by radio, except in accordance with the Act and with a license from the FCC. In addition, Section 1.903(a) of the FCC’s Rules requires that stations in the Wireless Radio Services be operated in accordance with the rules applicable to their particular service, and only with a valid FCC authorization.

In August 2012, an agent from the Enforcement Bureau’s Denver Office inspected the STL facilities and found they were operating from a location approximately 0.6 miles from their authorized location. The agent concluded–and the licensee did not dispute– that the STL facilities had been operating at the unauthorized location for five years. A July 2013 follow-up inspection found that the STL facilities continued to operate from the unauthorized location.
Continue reading →

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May 2014

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 $11,000 Fine for Marketing of Unauthorized Device
  • $2,944,000 Fine for Robocalls Made Without Recipients’ Consent
  • Sponsorship Identification Complaint Leads to $185,000 Consent Decree
  • Premature Consummation of Transaction Results in $22,000 Consent Decree

Modifying Design of Parking Meter Requires New FCC Certification and Warning to Users

Earlier this month, the Spectrum Enforcement Division of the FCC’s Enforcement Bureau issued a Notice of Apparent Liability for Forfeiture (“NAL”) against a company that designs, develops, and manufactures parking control products (the “Company”). The NAL indicated the Company had marketed one of its products without first obtaining an FCC certification and for failing to comply with consumer disclosure rules. The FCC’s Enforcement Bureau proposed an $11,000 fine against the Company.

In August of 2013, the FCC received a complaint that a particular product made by the Company did not have the required FCC certification and that the product did not comply with consumer disclosure requirements. After receiving the complaint, the FCC’s Spectrum Enforcement Division issued a Letter of Inquiry (“LOI”) to the Company. The Company responded in the middle of March, at which time it described the product in question as a “parking meter that accepts electronic payments made with credit cards, smart cards, or Near Field Communications-enabled mobile device applications.” The response to the LOI indicated that the Company had received an FCC authorization in 2011 but had since refined the design of the product. Although one refinement involved relocating the antenna on the device, which increased the field strength rating from the level authorized in 2011, the Company assumed that the changes to the device qualified as “permissive changes” under Section 2.1043 of the FCC’s Rules. In addition, the Company admitted to marketing the refined product before obtaining a new FCC certification for the increased field strength rating, and that its user manual did not contain required consumer disclosure language. However, the Company had not actually sold any of the new parking meters in the U.S.

Section 302(b) of the Communications Act prohibits the manufacture, import, sale, or shipment of home electronic equipment and devices that fail to comply with the FCC’s regulations. Section 2.803(a)(1) of the FCC’s Rules provides that a device must be “properly authorized, identified, and labeled in accordance with the Rules” before it can be marketed to consumers if it is subject to FCC certification. The parking meter falls under this requirement because it is an intentional radiator that “can be configured to use a variety of components that intentionally emit radio frequency energy.” The Company’s product also meets the definition of a Class B digital device, in that it is “marketed for use in a residential environment notwithstanding use in commercial, business and industrial environments.” Under Section 15.105(b) of the FCC’s Rules, Class B digital devices “must include a warning to consumers of the device’s potential for causing interference to other radio communications and also provide a list of steps that could possibly eliminate the interference.”

The base fine for marketing unauthorized equipment is $7,000, and the base fine for marketing devices without adequate consumer disclosures is $4,000. The Company argued that even though it had marketed the device before it was certified, it had not sold any, and it promptly took corrective action after learning of the issue. The Enforcement Bureau declined to reduce the proposed fines because the definition of “marketing” does not require that there be a sale, and “corrective measures implemented after the Commission has initiated an investigation or taken enforcement action do not nullify or mitigate past violations.” The NAL therefore assessed the base fine for both violations, resulting in a total proposed fine against the Company of $11,000.

Unsolicited Phone Calls Lead to Multi-Million Dollar Fine

Earlier this month, the FCC issued an NAL against a limited liability company (the “LLC”) for making unlawful robocalls to cell phones. The NAL followed a warning issued more than a year earlier, and proposed a fine of $2,944,000. The LLC provides a robocalling service for third party clients. In other words, the LLC’s clients pay it to make robocalls on their behalf to a list of phone numbers provided by the client.

The Telephone Consumer Protection Act (“TCPA”) prohibits robocalls to mobile phones unless there is an emergency or the called party has provided consent. These restrictions on robocalls are stricter than those on live calls because Congress found that artificial or prerecorded messages “are more of a nuisance and a greater invasion of privacy than calls placed by “live” persons.” The FCC has implemented the TCPA in Section 64.1200 of its Rules, which mirrors the statute.

The LLC received an LOI in 2012 from the Enforcement Bureau’s Telecommunications Consumers Division (the “Division”) relating to an investigation of the LLC’s services. The Division required the LLC to provide records of the calls it had made, as well as to submit sound files of the calls. This preliminary investigation revealed that the LLC had placed 4.7 million non-emergency robocalls to cell phones without consent in a three-month period. After making these findings, the Division issued a citation to the LLC in March of 2013, warning that making future calls could subject the LLC to monetary penalties and providing an opportunity to meet with FCC staff and file a written reply. The LLC replied to the citation in April of 2013, and met with FCC staff.

However, in June of 2013, the Division initiated a second investigation to ensure the LLC had stopped making illegal robocalls. The LLC objected, but produced the documents and audio files requested. The Division determined, by analyzing the materials and contacting customers who had received the prerecorded calls made by the LLC, that the Company made 184 unauthorized robocalls to cellphones after receiving the citation. Continue reading →

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April 2014

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 $12,000 in Fines for Contest Violations
  • $20,000 Fine for Unlicensed Operation and Interference
  • Violations of Sponsorship Identification and Indecency Rules Lead to $15,000 Consent Decree

Changing Rules and Delay in Conducting Contest Lead to $12,000 in Fines

Late last month, the FCC’s Enforcement Bureau issued two essentially identical Notices of Apparent Liability for Forfeiture (“NALs”) against two radio station licensees for failure to conduct a contest as advertised. Although the stations have different licensees, one licensee provided programming to the second licensee’s station through a time brokerage agreement. The brokering station’s response to a letter of inquiry (“LOI”) addressed both licensees’ actions with regard to the contest. In the subsequent NALs, the FCC’s Enforcement Bureau proposed a $4,000 fine against the brokered licensee and an $8,000 fine against the brokering licensee.

In July of 2009, the FCC received a complaint that several radio stations held a weekly contest called “Par 3 Shoot Out” but did not conduct the contest substantially as announced or advertised. Specifically, the complaint maintained that at least one participant did not receive a promised prize of a golf hat and was not entered into a drawing to win a car or other prizes (as was promised in the contest’s rules). About four months later, the FCC issued an LOI to the licensee conducting the contest about the claims made in the complaint. In its response to the LOI, the licensee conducting the contest indicated that the contest consisted of two phases. The first was an 18-week, online golf competition where the highest-scoring contestant each week would win a hat from a golf club. Each weekly winner and one write-in contestant would be able to participate in the second phase of the contest, a real golf competition consisting of taking one shot at a three par hole. As was publicized online, the prize for the winner of the second phase was a $350 golf store gift certificate, and if anyone hit a hole-in-one, they would win a Lexus car.

According to the brokering licensee, the first phase of the contest took place between June and November 2008. The contest took place entirely online, and although the second phase was scheduled to begin in November 2008, it was postponed due to inclement weather and ultimately did not occur at all because the employee who was tasked with running the live golf competition was fired, and the remaining staff never resumed the contest. The brokering licensee further indicated that it forgot about the contest until it received the FCC’s LOI, and, after receiving the LOI, the second phase of the contest occurred and was completed by January 2010. The brokering licensee indicated that it had provided additional prizes of a $25 golf store gift card and a catered lunch to each finalist in the second phase given the delay in conducting the contest.

Section 73.1216 of the FCC’s Rules requires that a station-sponsored contest be conducted “substantially as announced or advertised” and must fully and accurately disclose the “material terms,” including eligibility restrictions, methods of selecting winners, and the extent, nature and value of prizes involved in a contest.

The Enforcement Bureau determined that the contest was not conducted as announced or advertised because the rules were changed during the course of the contest and the contest was not conducted within the promised time frame. The Bureau further found that the licensees failed to fully disclose the material terms of the contest as required by the Commission’s rules. According to the Bureau, the on-air announcements broadcast by the stations failed to mention all of the prizes the licensee planned to award and failed to describe any of the procedures regarding how prizes would be awarded or how the winners would be picked. The brokering licensee argued in its response to the LOI that the full rules were included online, which was a better way to make sure that potential contest participants were not confused. However, the Bureau found that while licensees can supplement broadcast announcements with online rules, online announcements are not a substitute for on-air announcements.

The base fine for failure to conduct a contest as announced is $4,000. The Bureau determined that, contrary to the argument presented in response to the LOI, “neither negligence nor inadvertence” due to the overseeing employee’s departure “can absolve licensees of liability.” The Bureau also said that providing additional prizes to make up for the delay does not overcome the violation of Section 73.1216. Finally, the FCC found that the licensees had failed to disclose the material terms of the contest because the advertisements that were broadcast over the air did not mention certain prizes.

The FCC proposed to impose the base fine amount of $4,000 against the time-brokered station after determining that the licensee had violated Section 73.1216. For the brokering licensee, the FCC proposed an increased fine of $8,000 because of the licensee’s “pattern of violative conduct, and because it conducted the Contest over four stations, not one, thus posing harm to a larger audience.”

Nine Years of Unauthorized Operation and Interference to Wireless Operator Lead to Large Fine

The FCC recently issued a Forfeiture Order to the former licensee of a Private Land Mobile Radio Service (“PLMRS”) station. The Forfeiture Order follows an NAL that the FCC released in July of 2012 proposing a fine of $20,000 for the former licensee of the facility for operating without a license for nine years and causing interference to another wireless service provider.

The former licensee initially received the license for the PLMRS station in April 1997 for a five-year term. Three months before the expiration of the license, the FCC sent the licensee a reminder to renew the license, but the licensee never filed a renewal application. Therefore, the license expired in April of 2002. Nevertheless, the licensee continued operating the station, and on July 31, 2011, filed a request for Special Temporary Authority (“STA”) with the Wireless Telecommunications Bureau of the FCC. The licensee stated in the application that it had recently discovered that its license had expired and that it needed an STA to continue operating the station. The Wireless Bureau granted the STA three days later for a period of six months, until the end of January 2012. 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:

  • Inadequate Sponsorship ID Ends with $44,000 Fine
  • Unattended Main Studio Fine Warrants Upward Adjustment
  • $16,000 Consent Decree Seems Like a Deal

Licensee Fined $44,000 for Failure to Properly Disclose Sponsorship ID
For years, the FCC has been tough on licensees that are paid to air content but do not acknowledge such sponsorship, and an Illinois licensee was painfully reminded that failing to identify sponsors of broadcast content has a high cost. In a recent Notice of Apparent Liability (“NAL”), the FCC fined the licensee $44,000 for violating its rule requiring licensees to provide sponsorship information when they broadcast content in return for money or other “valuable consideration.”

Section 317 of the Communications Act and Section 73.1212 of the FCC’s Rules require all broadcast stations to disclose at the time the content is aired whether any broadcast content is made in exchange for valuable consideration or the promise of valuable consideration. Specifically, the disclosure must include (1) an announcement that part or all of the content has been sponsored or paid for, and (2) information regarding the person or organization that sponsored or paid for the content.

In 2009, the FCC received a complaint alleging a program was aired without adequate disclosures. Specifically, the complaint alleged that the program did not disclose that it was an advertisement rather than a news story. Two years after the complaint, the FCC issued a Letter of Inquiry (“LOI”) to the licensee. In its response to the LOI, the licensee maintained that its programming satisfied the FCC’s requirements and explained that all of the airings of the content at issue contained sponsorship identification information, with the exception of eleven 90-second spots. In these eleven spots, the name of the sponsoring organization was identified, but the segment did not explicitly state that the content was paid for by that organization.

Though the licensee defended its program content and the disclosure of the sponsor’s name as sufficient to meet the FCC’s requirements, the FCC was clearly not persuaded. The FCC expressed particular concern over preventing viewer deception, especially when the content of the programming is not readily distinguishable from other non-sponsored news programming, as was the case here.

The base forfeiture for sponsorship identification violations is $4,000. The FCC fined the licensee $44,000, which represents $4,000 for each of the eleven segments that aired without adequate disclosure of sponsorship information.

Absence of Main Studio Staffing Lands AM Broadcaster a $10,000 Penalty
In another recently released NAL, the FCC reminds broadcasters that a station’s main studio must be attended by at least one of its two mandatory full-time employees during regular business hours as required by Section 73.1125 of the FCC’s Rules. Section 73.1125 states that broadcast stations must maintain a main studio within or near their community of license. The FCC’s policies require that the main studio must maintain at least two full-time employees (one management level and the other staff level). The FCC has repeatedly indicated in other NALs that the management level employee, although not “chained to their desk”, must report to the main studio on a daily basis. The FCC defines normal business hours as any eight hour period between 8am and 6pm. The base forfeiture for violations of Section 73.1125 is $7,000.

According to the NAL, agents from the Detroit Field Office (“DFO”) attempted to inspect the main studio of an Ohio AM broadcaster at 2:20pm on March 30, 2010. Upon arrival, the agents determined that the main studio building was unattended and the doors were locked. Prior to leaving the main studio, an individual arrived at the location, explained that the agents must call another individual, later identified as the licensee’s Chief Executive Officer (“CEO”), in order to gain access to the studio, and provided the CEO’s contact number. The agents attempted to call the CEO without success prior to leaving the main studio.

Approximately two months later, the DFO issued an LOI. In the AM broadcaster’s LOI response, the CEO indicated that the “station personnel did not have specific days and times that they work, but rather are ‘scheduled as needed.'” Additionally, the LOI response indicated that the DFO agents could have entered the station on their initial visit if they had “push[ed] the entry buzzer.”

In August 2010, the DFO agents made a second visit to the AM station’s main studio. Again the agents found the main studio unattended and the doors locked. The agents looked for, but did not find, the “entry buzzer” described in the LOI response.

The NAL stated that the AM broadcaster’s “deliberate disregard” for the FCC’s rules, as evidenced by its continued noncompliance after the DFO’s warning, warranted an upward adjustment of $3,000, resulting in a total fine of $10,000. The FCC also mandated that the licensee submit a statement to the FCC within 30 days certifying that its main studio has been made rule-compliant.

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Headlines:

  • FCC Begins to Move on Pending Video News Release Complaints
  • Failure to Monitor Tower Lighting Results in $12,000 Penalty

Video News Releases Garner $4,000 Fines for Two Television Broadcasters
After a flurry of complaints from advocacy groups a few years ago raised the issue at the FCC, the Commission has been pondering how to treat Video News Releases (VNRs) with respect to its sponsorship identification rule. The result has been a growing backlog of enforcement investigations involving VNRs. However, the release of two decisions proposing fines for stations that aired all or part of a VNR without identifying the material on-air as being sponsored appears to indicate that the dam is about to break. In its first VNR enforcement actions in years, the FCC fined two unrelated television stations $4,000 each for violating the sponsorship identification requirements found in Section 317 of the Communications Act and Section 73.1212 of the FCC’s Rules.

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