February 9, 2023

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The Legal System

This Week in Regulation for Broadcasters: November 26 to December 2 , 2022

This Week in Regulation for Broadcasters: November 26 to December 2 , 2022

In a very busy week, here are some of the regulatory developments of significance to broadcasters from the past week, with links to where you can go to find more information as to how these actions may affect your operations.

  • The Federal Trade Commission and seven state Attorneys General announced a settlement with Google LLC and iHeart Media, Inc. over allegations that iHeart radio stations aired thousands of deceptive endorsements for Google Pixel 4 phones by radio personalities who had never used the phone.  The FTC’s complaint alleges that in 2019, Google hired iHeart and 11 other radio broadcast companies to have their on-air personalities record and broadcast endorsements of the Pixel 4 phone, but did not provide the on-air personalities with the phone that they were endorsing.  Google provided scripts for the on-air personalities to record, which included lines such as “It’s my favorite phone camera out there” and “I’ve been taking studio-like photos of everything,” despite these DJs never having used the phone.  The deceptive endorsements aired over 28,000 times across ten major markets from October 2019 to March 2020.  As part of the settlement, subject to approval by the courts, Google will pay approximately $9 million and iHeart will pay approximately $400,000 to the states that were part of the agreement.  The settlement also imposes substantial paperwork and administrative burdens by requiring both companies to submit annual compliance reports for a period of years (10 years in the case of iHeart), and create and retain financial and other records (in the case of iHeart, the records must be created for a period of ten years and retained for five years).
    • This case is a reminder that stations must ensure that their on-air talent have at least some familiarity with any product they endorse, particularly where on-air scripts suggest that they have actually used the product.  Stations should not assume that talent know the relevant rules – they more likely will just read whatever is handed to them without understanding the potential legal risk for the station, which, as demonstrated in this case, could be significant.
  • In a Federal Register notice, the Copyright Royalty Board announced cost-of-living increases in the statutory royalties to be paid by webcasters for the public performance of sound recordings. These are the royalties paid to SoundExchange by those making noninteractive digital transmissions of sound recordings.  In 2022, commercial webcasters, including broadcasters streaming their programming on the Internet, pay $.0022 per performance for a nonsubscription transmission and $.0028 per performance for a subscription transmission.  The Federal Register publication sets out the computations for the cost-of-living increase and announces that the rate for nonsubscription transmissions made in 2023 will be $.0024 per performance, and for subscription transmissions, the rate will be $.0030 per performance.  For noncommercial webcasters, the 2023 rate will be $0.0024 per performance for all digital audio transmissions in excess of the monthly 159,140 aggregate tuning hours of music programming per channel or station that a noncommercial webcaster gets for its yearly $1000 per channel minimum fee.  We provided more information about this cost-of-living increase in an article on our Broadcast Law Blog, here.
  • At an open meeting held on December 1, 2022, the Federal Election Commission (FEC) adopted new disclaimer requirements for internet-based political advertising, including the identification of the ad sponsor.  This decision resolves issues that have been debated at the FEC for over a decade.  These rule changes will impact anyone that accepts political advertising on websites or other digital platforms. The FEC adopted a proposal that would amend its rules to require disclaimers on all “communications placed for a fee on another person’s website, digital device, application, or advertising platform.”  The FEC rejected, by a 4 to 2 vote, a broader proposal that would have included not just communications where the owner of the digital platform was paid for the inclusion of the ad, but also political communications where the platform itself may not have been paid, but where the sponsor of the communication paid others to promote or otherwise broaden the dissemination of the communication.  Instead, the FEC issued a Supplemental Notice of Proposed Rulemaking seeking public comment as to whether disclaimers should be required for such promoted communications. The new rules also describe the disclaimers that will be required on internet communications once the new rules become effective, and include exceptions to these requirements where, because of the size of the announcement or other technical limitations, the full disclaimer cannot be added.   The new rules will become effective after they have been transmitted to Congress for a 30-day review period.  Comments on the Supplemental Further Notice will be due 30 days after the notice is published in the Federal Register.
  • The FCC’s Media Bureau released a Public Notice seeking comment on a Petition for Rulemaking filed in October 2022 by the NAB and Xperi Inc.  The Petition asks the FCC to (i) adopt an updated formula to determine FM digital sideband power levels that would allow many stations to increase digital power; and (ii) consider this request with another raised in a 2019 petition to permit digital FM radio stations to utilize asymmetric sideband power levels without having to request experimental (a request granted by the Public Notice consolidating the issues raised by both petitions into one proceeding). The petitioners believe that adoption of these proposals will give FM HD Radio signals a greater coverage area and more robust signal strength, enhancing the attractiveness of the service to stations and consumers. We wrote more about this proceeding and the issues it raises, here. Comments and reply comments in this proceeding will be due January 12, 2023 and February 13, 2023, respectively.
  • The Media Bureau issued a Public Notice reminding television stations that the FCC’s audio description rules will extend to Nielsen DMAs 81 through 90 on January 1, 2023. Audio description makes video programming more accessible to individuals who are blind or visually impaired through “[t]he insertion of audio narrated descriptions of a television program’s key visual elements into natural pauses between the program’s dialogue.” The FCC’s audio description rules require television broadcast stations affiliated with the Top 4 networks and multichannel video programming distributors (MVPDs) to provide audio description for 50 hours per calendar quarter, either during prime time or on children’s programming, and 37.5 additional hours of audio description per calendar quarter between 6 a.m. and 11:59 p.m. local time, on each programming stream on which they carry one of the top four commercial television broadcast networks.  The FCC relies on Nielsen’s list of DMAs as of January 1, 2020, meaning that DMAs 81 through 90 are the following: Madison, WI; Waco-Temple-Bryan, TX; Harlingen-Weslaco-Brownsville-McAllen, TX; Paducah, KY-Cape Girardeau-Harrisburg, MO; Colorado Springs-Pueblo, CO; Shreveport, LA; Syracuse, NY; Champaign and Springfield-Decatur, IL; Savannah, GA; and Cedar Springs-Waterloo-Iowa City and Dubuque, IA.
  • The Auctions Division of the FCC’s Office of Economics and Analysis issued a Notice of Demand for Payment in the amount of $522,500 to the winning bidder of an FM construction permit in Auction 98 who defaulted on its auction bid and did not receive a waiver of the down payment deadline. The large amount due is attributable to fact that the winning bid received when the permit was re-auctioned was significantly less the bid originally submitted by the defaulting bidder.  This case is a reminder to auction participants that a winning bidder assumes a binding obligation to pay the full amount of its accepted winning bid.  A bidder who defaults on its bid is subject to a default payment including the amount by which the defaulted bid exceeds the amount received when the channel is sold in a subsequent auction, which, as demonstrated in this case, can be significant.
  • The Media Bureau continues to drop in new FM channel allotments, and grant channel substitutions for television stations to address signal reliability. In the past week, the Bureau has proposed to allot a new FM channel, Channel 233C, at Ralston, Wyoming as the community’s first local service. Comments and reply comments are due January 23 and February 7, 2023, respectively.  If allotted, the channel would be available to interested applicants in a future FM auction.  The Bureau has also granted VHF to UHF channel substitutions for existing television stations in Butte, Montana; Great Falls, Montana; and Missoula, Montana, and proposed a VHF-to-UHF channel substitution for a station in Yuma, Arizona (comment and reply comments are due 30 days and 45 days, respectively, after publication of the proposal in the Federal Register).   These VHF to UHF channel changes, which are sought because of UHF’s recognized superiority for digital television service, have been permitted since last year when the FCC lifted the freeze on TV channel changes that had been in effect for almost a decade while the FCC conducted its incentive auction and the subsequent repacking of the TV band.  For more information on the lifting of that freeze, see our article here.
  • On our Broadcast Law Blog, we wrote an article setting out many of the most significant regulatory dates for broadcasters in the month of December including rulemaking comment deadlines in several significant FCC proceedings – see that summary here.