FCC Underwriting Requirements The Rules of the Road

FCC Underwriting Requirements: The Rules of the Road John Crigler Garvey Schubert Barer NFCB Conference May 30, 2014

Introduction

Ads are bad on public radio & TV. q True q False

True, but you’ll never get many underwriters with that attitude. Use this game to test your knowledge of what an ad is and when you cross the line from identifying to promoting an underwriter.

An ad is any promotional announcement? q True q False

False that would violate broadcasting’s First Commandment: Promote thyself! An ad consists of two critical parts: (1) a verbal or visual promotion of a third party (2) that is broadcast in exchange for consideration.

Consideration

Consideration must be something of real value? It couldn’t be, say, a slice of cold pizza? q True q False

False. An FCC ruling held that pizza donated to a station during its pledge drive was consideration for on-air huzzas for the pizza store.

Consideration must be cash or an in-kind payment? q True q False

False. In one case, a free underwriting announcement was found to be “consideration” because it was an attempt to persuade a lapsed underwriter to renew. Potential “value” of any kind is enough to constitute consideration.

Who’s the Underwriter?

A station may run a paid public service announcement? q True q False q Call an Attorney

Call an attorney. There’s no simple answer to this one. The answer depends on whether the PSA is for an event or a cause, and whether the message really is a public service or a covert promotion. (“Drink responsibly, as long as it’s Bud Lite”). Most of all, the answer depends on whether the underwriter is a for-profit or non-profit.

You mean I can charge another non-profit out the wazoo? q True q False

True. Charity does not have to begin at home. FCC rules permit you to receive consideration for an announcement that promotes the goods, services or facilities of a nonprofit, unless you go overboard. If the announcement is long enough to interrupt regular programs, or if it turns into an on-air fundraiser for another non-profit you run afoul of FCC rules.

So I could run Marine recruitment ads, state lottery ads or paid announcements about a KKK rally? q True q False

True. The revenues may be taxable, since they have nothing to do with your educational purpose, but they would not subject you to an FCC fine. Your audience may return eventually.

Hey, I don’t want to pander to racists or start a war, I just want to survive by making simple, factually true statements. Is that ok? q True q False

False. Factually true statements may be promotional. The FCC recently fined a station for saying a band was “voted Canada’s #1 Bluegrass Band. ” The statement may have been true, but like most awards, honors and ratings, it was considered promotional (the station did not argue that the group might be Canada’s only blue grass band!).

Political parties’ campaign committees and public interest groups are non-profits. I’ll make a fortune in the next election. q True q False

False. In addition to prohibiting paid promotions of for-profits, the Communications Act prohibits political ads (announcements that support or oppose a political candidate) and “issue” ads (announcements that express a “view” on an issue of public importance or interest). It may be possible to craft underwriting announcements for political or advocacy groups, but “Beware, ” as B. B. King says, “There’s a world full of danger out there. ”

What’s Promotional?

Material is not “promotional” if it describes the underwriter? q True q False

True, if the announcement is value-neutral and brief. The FCC has identified 4 categories of “promotional” material: 1. Calls to action 2. Price information 3. Inducements to buy, sell, lease or rent 4. Qualitative or comparative description The categories are overlapping, not mutually exclusive.

That makes underwriting hard to sell. q True q False

True. An underwriting announcement must clearly identify the underwriter and indicate that consideration (or some clear synonym for consideration, such as “support, ” “contribution, ” “assistance, ” etc. ) has been provided. The announcement may also include brand or trade names, a “value-neutral” description of product lines or services, and location information. Location information may include a street address, phone number and website address. Development directors wear skinny jeans.

Let’s talk specifics. Would “gluten-free” be ok, but “toll-free” not? q True q False

True. The FCC has not ruled on “gluten free, ” but there’s a good argument that, in most contexts, glutenfree would be descriptive; whereas announcements containing the phrases “toll-free, ” “free checking” and “free consultation” have been found to contain price terms or inducements to buy. FCC rulings can’t be reduced to a list of “bad” words.

If there are no inherently “bad” words, there isn’t a difference between “fine art” and “fine BBQ, ” or between “fast food, ” “fast service” and “fast women. ” q True q False

Really false. “Fine art” and “fast food” have been considered descriptive of a category of goods and services. In most contexts, however, “fine BBQ” and “fast service” would be viewed as qualitative or comparative. You’re on your own with “fast women. ”

An announcement is ok if it doesn’t contain explicitly promotional terms? q True q False

False. Calling a sale a “special event” or a discount a “customer appreciation recognition” won’t cut it. In one ruling, the FCC found that a Korean grocery store’s claim to offer “the wisdom of thrift” was a price term – even when the claim was made in the Korean language.

So no logos or jingles on public stations? Where there’s fear, there’s law q True q False Where there’s fear, there’s law

False. It may seem counterintuitive, but the FCC gives “logograms” a wide berth, if they are “well established. ” The rationale is that logos may become so familiar as to become part of the underwriter’s identity. Based on this rationale, the FCC allowed Du. Pont’s “Better things for better living, ” A. G. Edwards “Exceptional Service, ” and an image of Amoco bobbing puppets singing “Can’t get enough of that funky stuff. ” On the other hand, it rejected arguments that the statement “We love selling real estate” qualified as a logo.

So highfalutin statements of corporate philosophy are ok? q True q False

True. The FCC has generally permitted “aspirational” statements about the goals to which a company is “committed” or “dedicated. ”

An announcement that is nothing more than a boring list of products and services is ok? q True q False q Not necessarily

Not necessarily. Even boring lists can be promotional if they are “excessively detailed. ” The FCC fined a station for an announcement stating that a building supply store offered “custom metal roofing, siding, hardware, trim, insulation, trusses and perma felt paper. ”

I can promote underwriters to my heart’s content on the Internet. q True, but… q False

True, but. The FCC regulates only on-air announcements, but the IRS expects you to pay taxes on revenues from ads (as the IRS defines “ads”). You may also find that Internet visitors are put off by hard sales pitches on your web site.

Tough Calls

I can identify more than one underwriter in one announcement, can’t I? q True q False

True, if everyone identified is an underwriter. The complications arise when you identify someone who has not provided consideration for an acknowledgement.

Underwriters often want to benefit nonprofits other than the station. Can an underwriter pay me for airing an announcement for a museum or church event? q True q False

False. An underwriting announcement must identify the party that provides the consideration.

Ok then, I can identify the underwriter, but indicate that it is sponsoring an exhibit at the museum. q True q False q Probably

Probably. There are no FCC rulings on this point. While such piggyback announcements may not promote the underwriter’s goods or services, they often do not contain the sort of identifying information the FCC permits (brand names, street addresses, etc. ). A ruling would probably turn on the question of whether the announcement clearly identifies the underwriter or whether the underwriter’s identity is obscured by information about the piggybacker.

The FCC’s underwriting policy encourages noncommercial stations to be enterprising. So would the FCC allow me to conduct a station fundraiser with a for-profit if the station is the primary beneficiary? q True q False q It’s complicated

It’s complicated. The answer depends on the relationship between the station and the for-profit. If the activity they undertake is a “joint venture, ” the FCC would regard a promotional announcement as an ad, because it “directly benefits” a for-profit. The FCC has taken that position even when the station gets more than 50% of the revenues.

These rules are so complicated. There must be room for error? q True q Grow up

True, if your judgment call is an “informed” judgment, not a gut feeling. Errors based on a reasonable interpretation of FCC rulings or consultation with a communications attorney may be a “good faith judgment. ” FCC rulings are posted at: http: //transition. fcc. gov/eb/broadcast/enhund. html.

The FCC’s rules make creative underwriting impossible? q Boo hoo

The FCC rules drastically limit the possibilities for what can be said in an underwriting announcement, but do not snuff creativity. Music beds, humor, zany logos (“Just do it!”) may all be permissible, as long as they are not “promotional. ” Only one of your hands is tied. The other can clap.

Now, forget everything you’ve learned, and for a limited time only, lock in great rates for award-winning legal advice by contacting John Crigler at the address below. Initial consultation free. All proceeds will be held in trust for a deserving non-profit: John Crigler Garvey Schubert Barer Flour Mill Building 1000 Potomac Street NW 5 th Floor Washington, D. C. 20007 jcrigler@gsblaw. com 202. 965. 7880 Tel