SPLC guide to noncommercial radio underwriting

Legal

Over-the-air educational radio stations are licensed to operate as “noncommercial” broadcasters — but what it means to be “noncommercial” can be confusing. Regulators have established lines that educational broadcasters cannot cross from acceptable sponsorship messages into unacceptable advertisements. It’s important to know these boundaries to minimize the risk of a budget-bustingfine.

The language and interpretation of the law

FM frequencies between 87.9(MHz) and 91.9(MHz) are reserved by the FCC fornoncommercial educational broadcast radio stations.1 FCC regulation provides that such stations will be licensed “only to a nonprofit educational organization and upon showing that the station will be used for the advancement of an educational program.”2 In virtue of this special educational mission, noncommercial educational stations are subject to heightened regulations more stringent than ordinary commercial stations. All radio broadcast stations, commercial and noncommercial alike, are required to announce that a particular program is paid for by an outside party and disclose the identity of that sponsor.3 In addition, noncommercial stations’ liberty to broadcast certain commercial speech is constrained by laws that do not apply to commercial stations.

Educational stations are regulated by both statutory codifications of Congress and rules and regulations promulgated by the Federal Communications Commission. In the early 1980s Congress amended the Communications Act of the 1934 to include sections 399a and 399b, both of which regard commercial speech of educational television and radio stations.

Section 399a governs the use of business or institutional “logograms,” defined as audio or visual signs (such as company slogans) that are “used for the exclusivepurpose of identifying… and which is not used for the purpose of promoting the products, services, or facilities of such corporation, company or other organization.”4 Public noncommercial stations are authorized to broadcast announcements that include logograms provided that such announcements do not interrupt regular programming.5 The key distinction to note is that between identification (permissible) and promotion (impermissible).

Section 399b prohibits the broadcasting of “advertisements,” defined to be a message or other programming material that is broadcast in exchange for payment and which:

  1. promotes any for-profit company’s service, facility or product;
  2. expresses the views of any person with respect to any matter of public importance; or
  3. supports or opposes any candidate for political office.

Although precise in language, 399a and 399b have been interpreted to leave room for the FCC to issue its own interpretative gloss under its general powers toestablish, and manage the use of, categories of communication services.6 In a rule that essentially reiterates the congressional statute, the FCC proclaims that “no promotional announcement on behalf of for profit entities shall be broadcast at any time in exchange… for the receipt of consideration. However, acknowledgments of contributions can be made. The scheduling of any announcements and acknowledgments may not interrupt regular programming.”7 Because of the overlap, potential transgressors are usually charged with violations of Sec. 399(b) of the statute and Sec. 73.503(d) of the commission’s rules.

What is permissible?

The FCC has long recognized the difficulty in distinguishing between announcements that promote and those that identify.8 The question is what to do about those announcements that straddle the fencebetween promotion and identification.

One relevant case involved Xavier University’s Cincinnati-based educationalstation, WVXU-FM. The FCC sent a letter of admonition to the station based onsix questionable announcements. The borderline announcements used the followingterms to describe businesses sponsoring WVXU programming: “creative services,” “fresh and original foods,” “art expressing timeless traditional truths,” “serving … consulting needs for over 75 years,” and “in its 36th year.” One announcement also specifically mentioned a “discount” being offered by a local oil-change shop.

In the original letter of admonition, the FCC found the above language to be qualitative and comparative and thus impermissibly promotional. On reconsideration, FCC found that the language was not clearly promotional as opposed to identifying — with the exception of the oil-change discount spot, which the station promptly recognized as a violation and pulled down. Because Xavier exercised reasonable, good faith judgment, the Commission concluded there was no punishable violation. The FCC declared that it will grant some latitude to “reasonable, good faith judgment” of the licensee.9 In theory, this buffer should serve to insulate licensees against liability in debatable situations, but it is difficult to discern whether this Xavier presumption actually does any work, or rather is just lip service to discretion.

In response to the clamor for clarification, FCC has issued multiple policy memos addressing what subject matter is acceptable. In a first report, promulgatedsoon after the passage of Section 399b in 1981, the FCC explained that stations can carry promotional announcements on behalf of for-profit entities that offer”program-related” materials, so long as the station: “(1) receives no consideration for the announcement; and (2) the materials are offered on the basis of public interest considerations and not the private economic interests of the offeror; or (3) the price of the materials offered is only nominal.”10 For example, this would cover commercial products that a station offers as fundraising premium gifts, such as a particular brand of umbrella.

A year later, the FCC published a second report making clear that there is norestriction against broadcasting promotional announcements on behalf of non-profit organizations, although the audience must be informed of the identity of the sponsor.11

In 1984 the FCC issued a third report on the subject, in which they expresslyendorsed certain “enhanced” donor or underwriter acknowledgements.12 The expansion encompasses “(1) logograms or slogans which identify and do not promote, (2) location information, (3) value neutral descriptions of a product line or service, and (4) brand and trade names and product of service listings.”13 Later, the FCC added telephone numbers to the permitted list.14 While telephone numbers and location information are clear enough, whether a description is “value neutral” is far more nebulous. Each of the debatable broadcasts in the Xavier case centered on just that question — whether the information was a proper value neutraldescription or illicit promotion.

To get a feel for the law it may be helpful to look at a few examples of languagethat the FCC ultimately deemed acceptable. The sample size is small and includes only phrases that were alleged to be violations but ultimately were cleared.

The FCC has approved use of the following phrases: “professional equipment and supplies,”15 “home style food,”16 “an intelligent four-wheel drive system,”17 “surgery never has to be unpleasant,”18 “only” (if “only” is used to indicate the store has the only goods of an identified kind within a geographic area but is otherwise not promotional or comparative).19

What is impermissible?

The FCC, likewise, has decreed certain practices to be definitely off limits. The Third Report, although allowing for some enhanced underwriting, affirmativelydeclared that both underwriting announcements as well as donor acknowledgements must not interrupt regular programming.20 The Fourth Report forbids inclusion of “qualitative and comparative descriptions of the donor’s products or services.”21 For clarification’s sake the Fourth Report also proscribed: 1. Announcements containing price information (e.g. “7.7% interest rate available now”); 2. Announcements containing a call to action (e.g. “Stop by our showroom to see a model”); 3. Announcements containing an inducement to buy, sell, rent or lease (e.g. “six months’ free service”, “A bonus available this week”, “Special giftfor the first 50 visitors”).22

Examples of impermissibly violative language are more numerous. The following language has been held to be overly comparative: “more” (as in “more vivid,”23 “more realistic,”24 “more choices,”5 “see more get more,”26); “most” (as in “the people that know most about…”,27 “the best fastest most comfortable way to Poland,”28 “most recent selection when it comes to rims,”29 “most loved,”30 “most trusted,”31 “most anticipated,”32); “best” (as in “best airline in the world”33; “number one”34; “greatest”35; “biggest variety”36; “hottest”37; “doing things right”38; “special” (as in “special place, always with something special for you”39); “is a member of the Professional Photographers of America.”40

The following language has been found impermissibly qualitative: “efficient,economical, dependable, dedicated, prompt, fair price, reliable and excellent”41; “quality financial services”42;”friendly efficient crew”43; “convenient”44; “pretty to catch my fancy. . . strong. . . sharp. . . beautiful safety design. . . detailed lines, gorgeous power acceleration.”45; “established”46; “beautiful.”47 The FCC has declared that the “factuality” or “truth” of the description has no relevance to determining whether it should considered a promotion.48

To give a concrete example — from one of the few enforcement actions ever brought against a station operated by high school students — the FCC issued a written admonition to WPSR-FM in Evansville, Ind., because messages by corporate sponsors crossed the line into promoting for-profit products and services.49 The messages — mostly aired during WPSR’s broadcasts of University of Southern Indiana basketball games — included the following prohibited phrases:

“One can choose from one of eight different sandwiches, complete with chips and a 21-ounce drink” at a sub sandwich chain.

An automotive business “offers free tire mounting, free lifetime tire rotations with purchase, and free estimates and brake inspections.”

A local florist, “the friendliest store in town, has made it convenient for those people wanting to order a flower bouquet or just buy a single flower, for any occasion.”

As these examples show, it is perilous to include any detailed description touting a sponsor’s product or service. But it can also be risky to include more generic language about the overall merits of the business. One of the other announcements that the FCC found impermissibly comparative, qualitative and descriptive simply said of a local bank: “Financial services from people with old-fashioned know-how is a way of life for us.”

In one recent case,50 broadcasters brought a constitutional challenge alleging that Section 399b was both an infringement of their First Amendment rights and was unconstitutionally vague by use of the unclear term “promote.” Because the speech at issue is commercial, the court did not apply the highest level of First Amendment protection possible. Rather, the court applied an intermediate level of scrutiny, meaning that the burden is on the government to show that the restriction is narrowly tailored toward a significant government interest — but not necessarily the least restrictive method of achieving that interest.

The district court concluded that the FCC’s interest in “diversity of programming” was indeed substantial and that Section 399b struck a proper balance between financial viability and preserving the essential noncommercial, educational character of the service.51 The court further concluded that the line between promotion and identification was not unconstitutionally vague, in part reasoning that “a station that is unsure of whether a particular underwriting announcement would run afoul of the statute may seek informal guidance or formal clarification from the agency.”52

Penalties for violation

Violators subject themselves to a range of penalties. At the less severe end of the spectrum, the FCC issues warning letters in lieu of formal enforcement if itappears that the violation was minor or the licensee had a previously unblemished record.53

On the other hand, willful and repeated failure to comply with Section 399b of the Act and Section 73.503(d) of the Commission’s rules will be met with monetaryfines.54 “Repeated” has been construed to mean that the act was committed or omitted more than once, or lasts more than one day.55

The base amount for such a fine is $2,00056,although that amount can be adjusted up or down based on the “nature, circumstances, extent and gravity of the violation”57and with respect to the violator “the degree of culpability, any history of prior offense, ability to pay, and such other matters as justice may require.”58 A reduction in fine based upon inability to pay requires submission of full financial information of the licensee.59

By way of example, in one recent case, Cayuga County Community College was granted a $500 reduction in forfeiture amount because of its prior record of compliance with the law. After-the-fact remedial efforts, like terminating the programthat committed the violation, are not considered to be reasons for mitigation of the fine.60

Generally, the two most significant factors in determining the severity of the fine are the number of illegal broadcasts and the durational period thereof. The FCC has levied a $20,000 forfeiture for 10 announcements over a 15-month period,61 a $12,500 forfeiture for thousands of announcements over a 9-month period,62 a $10,000 forfeiture for 288 announcements over a 1-month period,63 a $5,000 forfeiture for 8 announcements on 2 days over a week-long period,64 a $2,500 forfeiture for 4 announcements on 2 days over a week long-period.65 Countless other cases end in consent decrees in which the parties arrive at a settlement agreement.

A licensee has the right to initial FCC determinations to a higher administrativecourt. From a final FCC decision, the licensee may appeal to federal court. Itwas recently decided, however, that a competitor radio station does not havestanding to appeal the FCC’s determination that certain advertising on its competitor station did not warrant enforcement action.66

Conclusion

As a policy matter, there are legitimate questions whether it makes sense as a policy to draw the legal line between promotion and identification. Andrew Cotlar has suggested that, in a world where advertising has moved toward “image spots”, it is anachronistic to differentiate between identification and promotion at all.67 It often leads to inconsistent outcomes and enforcement that could chill speech, notwithstanding the supposed leeway that the Xavier presumption provides. But history shows that the standards set by Section 399b are likely to withstand constitutional challenge, so — like it or not — over-the-air broadcasters must make their best effort to avoid crossing the “promotional” line.

While the boundaries are not always unmistakably clear, stations should be wary of any announcement that actually describes the merits of particular products or services that a for-profit company offers — and certainly avoid anything mentioning specials, discounts or other merchandizing campaigns. Maintaining a clean record, and pulling down any impermissible spots promptly, do appear to minimize (and at times even eliminate) exposure to onerous FCC penalties.

Endnotes

  1. 47 C.F.R. Sec. 73.501.
  2. 47 C.F.R. Sec. 73.503(a).
  3. See 47 C.F.R. Sec. 73.1212 ; Sec. 73.503(d).
  4. 47 U.S.C. Sec. 399a(a).
  5. 47 U.S.C. Sec. 399a(b).
  6. 47 U.S.C. Sec. 303(a), (b).
  7. 47 C.F.R. Sec. 73.503(d).
  8. See In re Comm’n Policy Concerning the Noncommercial Nature of Educ. Broad. Stations, 90 F.C.C.2d 895, 911 (1982) (“Second Report”).
  9. In re Xavier University, Memorandum Opinion and Order, 5 F.C.C. R. 4920, 4921 (1990).
  10. In re Comm’n Policy Concerning the Noncommercial Nature of Educ. Broad. Stations, 86 F.C.C.2d 141, 152 (1981) (“First Report”).
  11. See Second Report, 90 F.C.C.2d at 907.
  12. In re Comm’n Policy Concerning the Noncommercial Nature of Educ. Broad. Stations, 97 F.C.C.2d 255, 263 (1984) (“Third Report”).
  13. Id.
  14. In re Comm’n Policy Concerning the Noncommercial Nature of Educ. Broad. Stations, 7 F.C.C.R. 827, 827-28 1992 WL 695229 (1992) (“Fourth Report”).
  15. In re Family Vision Ministries, Inc., Memorandum Opinion and Order, 18 F.C.C.R. 1418, 1419 n.5 (2003).
  16. Id.
  17. Id.
  18. Id.
  19. Agape Brdcst. Found., Notice of Apparent Liability for a Forfeiture, 13 F.C.C.R. 13154, 13155 (1998).
  20. Third Report, 97 F.C.C.2d at 266.
  21. Fourth Report, 7 F.C.C.R. 827, 827-28.
  22. Id. at 828.
  23. Letter to Window to the World Commun. (WTTW-TV), Notice of Apparent Liability, 12 F.C.C.R. 20239, 20240 (1997).
  24. Id.
  25. Letter to KRTM-FM, 8 F.C.C.R 1 (1992)
  26. Minority TV Project, Inc., Notice of Apparent Liability for Forfeiture, 17 F.C.C.R. 15646, Para. 29 (2002).
  27. Caguas Educ. TV, Inc., Notice of Apparent Liability for Forfeiture, Para. 7 (2005), available at http://www.fcc.gov/eb/Orders/2005/DA-05-725A1.html.
  28. Letter to Frank Sobrino (WNYE-TV), Sept. 6, 1995.
  29. In re National Farmworkers Service Center, Inc., Notice of Apparent Liability for Forfeiture, 2010 WL 2407953, *4 (June 15, 2010).
  30. In re Independence Public Media of Philadelphia, Inc., 24 F.C.C.R. 857, 860 (2009).
  31. Id.
  32. Id.
  33. Minority TV Project, Inc., Notice of Apparent Liability for Forfeiture, 17 F.C.C.R. 15646, Sec. 20 (2002).
  34. Letter to KRTM-FM, 8 F.C.C.R 1 (1992).
  35. Caguas Educ. TV, Inc., Notice of Apparent Liability for Forfeiture, Sec. 7 (2005).
  36. Id.
  37. In re National Farmworkers Service Center, Inc., Notice of Apparent Liability for Forfeiture, 2010 WL 2407953, *4 (June 15, 2010).
  38. In re Jones College, 24 F.C.C.R. 231, 234 (2009).
  39. Id.
  40. Calvary Bible Coll., Memorandum Opinion and Order, 17 F.C.C.R. 19144, Para. 9 (2002).
  41. Letter to WBHL, Notice of Apparent Liability, 7 F.C.C.R. 5123, 5123 (1992).
  42. Letter to KRTM-FM, 8 F.C.C.R 1 (1992).
  43. Russellville Educ. Brdcst. Found., Notice of Apparent Liability for Forfeiture (1999), available at http://www.fcc.gov/Bureaus/Mass_Media/Orders/1999/da991280.txt.
  44. Tri-State Inspirational Brdcst. Corp., Memorandum Opinion and Order, 16 F.C.C.R. 16800, Para. 6 (2001).
  45. Minority TV Project, Inc., Notice of Apparent Liability for Forfeiture, 17 F.C.C.R. 15646, Para. 22 (2002).
  46. Hispanic Brdcst. Sys., Inc., Notice of Apparent Liability for Forfeiture, 20 F.C.C.R 2411, Para. 9 (2005).
  47. In re National Farmworkers Service Center, Inc., Notice of Apparent Liability for Forfeiture, 2010 WL 2407953, *4 (June 15, 2010).
  48. In Re Cayuga County Community Coll., 24 F.C.C.R. 8573, *3 (2009).
  49. Letter of the Chief, Complaints & Political Programming Branch, Enforcement Division, to Evansville-Vanderburgh School Corporation WPSR(FM) (March 23, 1999) (unpublished letter ruling).
  50. Minority Television Project Inc. v. F.C.C., 649 F.Supp.2d 1025 (N.D. Cal. 2009).
  51. Id. at 1034-36.
  52. Id. at 1047.
  53. Id. at 1048.
  54. See 47 U.S.C.A. Sec. 503(b).
  55. In re National Farmworkers Service Center, Inc., Notice of Apparent Liability for Forfeiture, 2010 WL 2407953, *4 (June 15, 2010).
  56. See The Commission’s Forfeiture Policy Statement and Amendment of Section 1.80 of the Rules to Incorporate the Forfeiture Guidelines, 12 F.C.C.R. 17087, 17115 (1997), recons. denied, 15 F.C.C.R. 303 (1999); 47 C.F.R. Sec. 1.80(b).
  57. 47 U.S.C. Sec. 503(b)(2)(E).
  58. Id.
  59. In re Cayuga County Community Coll., 24 F.C.C.R. 8573, *3 (2009).
  60. In re Jones College, 24 F.C.C.R. 231, 236 (2009).
  61. Christian Voice of Central Ohio Inc. (WCVZ-FM), 19 F.C.C.R. 23663 (2004) (reduced later to $9,000 for good compliance history and after reevaluating the acceptability of one of the announcements).
  62. In re National Farmworkers Service Center, Inc., Notice of Apparent Liability for Forfeiture, 2010 WL 2407953, *4 (June 15, 2010).
  63. Hispanic Brdcst. Sys., Inc., Notice of Apparent Liability for Forfeiture, 20 F.C.C.R 2411 (2005).
  64. In re Jones College, 24 F.C.C.R. 231 (2009).
  65. In re Independence Public Media of Philadelphia, Inc., 24 F.C.C.R. 857 (2009).
  66. KERM, Inc. v. F.C.C., 353 F.3d 57 (D.C. Cir. 2004).
  67. Andrew D. Cotlar, You Said What? The Perils of Content-Based Regulation of Public Broadcast Underwriting Acknowledgements, 59 Fed. Comm. L. J. 47, 48 (2006).