CommLawBlog : Broadcast & Communications Lawyers & Attorneys : Fletcher Heald & Hildreth Law Firm : Telecommunications, FCC Regulation, Communications Act

As it turns out, the policy includes some significant qualifying language which could cause it to fall short, in practice, of what the FCC had in mind.  As announced by the 4A’s, the policy reads:

NON-DISCRIMINATION POLICY RELATED TO VENDOR SELECTION

[Insert here name of agency: hereafter Agency] is dedicated to a policy of equal opportunity for all media vendors, suppliers and agents (“Vendors”). Subject to the protection of Agency’s and its clients’ confidential information, Agency will clearly communicate selection criteria to all appropriately qualified Vendors. Consistent with each Agency client's marketing communications strategies, effective media target audience planning, and efficient media buying practices, Agency policy is to grant equal opportunity to all such Vendors.

Complaint Review Process

A Vendor that feels it has been the victim of discriminatory buying practices by Agency shall be provided the opportunity to voice its dissatisfaction through Agency’s complaint review process. For purposes of this review process, discriminatory buying practices shall be defined as any buying policy that is in conflict with FCC media regulations, and thereby negates equal opportunity.

Agency will provide each of its Vendors with the opportunity to present in writing the basis of its dissatisfaction to Agency’s Discrimination Complaint Review Committee. Based on its findings, the committee may request a meeting with the Vendor to discuss all pertinent information related to the complaint.

Consider that language carefully: the equal opportunities to be accorded Vendors are to be “[c]onsistent with each Agency client’s marketing communications strategies, effective media target audience planning, and efficient media buying practices” (we added that emphasis.) What does that mean? Doesn’t it expressly acknowledge that “audience target[ing]”, “marketing strategies” and consideration of “efficien[cy]” are factors which are to be accommodated in the quest for “equal opportunity” for vendors? 

How would that work in practice? 

For example, what if a promoter hoping to sell season tickets to the opera believed, based on reliable and objective market research, that he could more efficiently reach his target audience by advertising on, say, a news/talk station rather than on one with an Urban format? This isn’t to say that no Urban listener would ever buy a ticket to the opera; but if you’re looking to reach a lot of opera buffs all at once, assume that the available research strongly indicates that by far your best bet is with news/talk audiences and not with Urban audiences. If the advertising agency representing that promoter acted accordingly and imposed a “No Urban” limitation on its ad buys, would that still be OK according to the 4A’s non-discrimination policy?  

What about an importer of a food product considered a delicacy among some South American cultures who wishes to advertise that product exclusively on Spanish-language stations – to the exclusion of other foreign-language or English language stations, including Urban music stations – would that be acceptable? 

Both approaches would seem to pass muster under the new 4A’s policy – since the buys in question would be (a) in line with the client’s marketing strategies and (b) designed efficiently to deliver the client’s message to the client’s chosen target audience. And neither approach appears to be motivated by any pernicious racism. But both approaches would, at least arguably, discriminate on the basis of race or ethnicity, and both would appear to involve the type of express “No Urban” order that the FCC seems intent on stamping out. Is that what the Commission had in mind?

And beyond that, when a Vendor that believes it has suffered from discriminatory buying practices, the 4A’s policy statement affords that Vendor an opportunity to express its concerns through a complaint review process. For purposes of this process, discriminatory buying practices are defined as “any buying policy that is in conflict with FCC media regulations, and thereby negates equal opportunity.” But there are no FCC rules (or “media regulations”) whatsoever on this subject. Nor are there likely to be. Sure, the FCC has raised its eyebrows at buying practices that exclude certain stations, and it has required broadcast stations to certify that they themselves maintain nondiscriminatory contracting practices, but the FCC has no jurisdiction over either the advertisers or the advertising agencies that make the actual buying decisions. So the 4A’s policy on its face does not impose any blanket prohibition against any particular type of advertising restriction.

This is not to say that we think for a minute that the 4A’s promotes improper discrimination or that its new policy is just a cleverly worded effort to sidestep the FCC’s wishes while seeming to embrace them.

Rather, the 4A’s policy appears to be a genuine, good faith effort to acknowledge and address the fact that the purchase of advertising, by its very nature, is a fundamentally discriminatory activity. Not “bad” discriminatory, but discriminatory in the sense that the advertiser has to decide where to spend his/her/its limited advertising dollars, and that decision-making process requires the drawing of lines. And when an advertiser draws lines, discrimination is occurring – discrimination based not on bias against race or ethnicity, but on the advertiser’s ability to achieve his/her/its particular commercial goals. 

With that in mind, perhaps it’s time to take another look at this whole issue, starting with the unarguable premise that all players in the advertising game are in it to make money. From the advertiser’s point of view, the goal is to sell as much of the advertiser’s product as possible. No non-discrimination policy will deter advertisers from attempting to meet that goal as efficiently as possible. Perhaps the 4A’s new policy, with its less-than-absolute language and its apparent acknowledgment of the priority of advertisers’ strategic interests, may be the best policy after all.

Now if only the FCC would recognize the practical reality that not all “discrimination” – including some discrimination which might arguably be based on race, ethnicity, gender or other factors – is necessarily unlawful, inappropriate or even undesirable.

We confess that, when the Diversity Order was first issued, we were a bit perplexed as to why the FCC was insisting that broadcasters’ certifications refer to “race or gender”. After all, the new policy was based on concern about alleged “No Urban/No Spanish” advertising orders, not “No Urban/No Female” orders. So when the Erratum explains that the change is necessary to “more accurately reflect the Commission’s clear intent”, it’s hard to argue – even if it makes you wonder (a) how, exactly, the mistake got through in the first place and (b) why it’s taken more than two years to acknowledge and correct it.

The Erratum offers no explanation about why the change is being made now (as opposed to, say, April, 2008) – but we can speculate. The required certification is to be included in Form 303-S, the broadcast renewal application form. Since the most recent broadcast renewal cycle had just wrapped up in early 2007 – less than a year before the Diversity Order was adopted – and the next wasn’t going to start until 2011, the Commission probably didn’t feel any pressure to revise the form to include the certification back then. But now, with the first renewal applications of the next cycle due in little more than a year, the Commission may be starting to focus on nitty-gritty details like how, exactly, the certification should be worded.

The precise wording of the certification is not unimportant. Of course, we know from the Diversity Order that, come renewal time, each broadcaster will be expected to certify that: (a) the broadcaster’s advertising contracts do not discriminate on the basis of race or gender (oops, make that race and ethnicity); and (b) such contracts contain nondiscrimination clauses. But the Commission still hasn’t bothered to explain exactly what it expects such “nondiscrimination clauses” to say. 

In the wake of the Diversity Order, we took at stab at crafting a nondiscrimination clause to address the problems targeted by the Commission. The trouble is, we really don’t know for sure whether that good faith effort will be satisfactory to the Commission come renewal time. In fact, we know for sure that our original suggested language will definitely not be satisfactory, since our language – which was based on the FCC’s own language in the Diversity Order – referred to “race and gender”, rather than “race and ethnicity”. We know now that that was wrong – but how was anybody to know that before the recent Erratum, since the Commission had been very clear up to that point that it was targeting discrimination against “race and gender”?

In any event, anyone who has been trying to assure their ability to certify accurately that they have complied with the FCC’s nondiscrimination policy – whether by sticking our suggested contract language or somebody else’s into their advertising contracts – would do well to take the time, now, to substitute “ethnicity” for “gender” where appropriate. And if you previously sent out letters to all your advertisers indicating that the nondiscrimination language should be deemed to be a part of all agreements previously entered into, you might want to send out another batch of similar letters, this time substituting (you guessed it) “ethnicity” for “gender”.

And now that the Erratum has re-focused everybody’s attention on the nondiscrimination certification requirement, we offer a couple of questions to ponder.

First, when the renewal application certification language is finally adopted by the Commission, how will it deal with the fact that, from 2008-2010, the agency’s direction had been to avoid discrimination based on “race and gender”, not “race and ethnicity”? 

Second, how are we to interpret the fact that the Commission has removed “gender” from the mix, rather than simply inserting “ethnicity” along with “race” and “gender”. Doesn’t that seem to send the somewhat distasteful message that advertising contracts that discriminate based on gender are OK?

Third, while we may all agree that ethnic discrimination can be a bad thing, is it really advisable to impose a blanket prohibition which seems to bar, or at least discourage, all ethnicity-based advertising? For example, if an advertiser wants to target a particular ethnic community with spots in that community’s native tongue, wouldn’t it be perfectly reasonable to limit the run of those spots to stations broadcasting in that language? So if you have an ad in Chinese, directed (obviously) to a Chinese-speaking audience, wouldn’t you want to be able to specify “Chinese language radio, no English or Spanish or Arabic”? But wouldn’t such a limitation run afoul of the nondiscrimination policy as it currently stands? Is this really what the Commission wants?

Fourth, where do noncommercial stations fit in here? The Diversity Order (at Paragraphs 49-50, if you’re inclined to check) referred only to “advertising” contracts. As we all know, NCE stations air “enhanced underwriting announcements”, not ads. But many might argue that it’s all pretty much the same thing. Plus, NCE stations use the same Form 303-S as commercial licensees for their renewals. Our guess is that NCE licensees are subject to the nondiscrimination policy, But the Commission hasn’t said so expressly.

And finally, exactly how does imposing the new certification requirement on all broadcasters (including broadcasters who may themselves happen to be the victims of the “No Urban/No Spanish” practices) have any effect at all? Isn’t it the advertiser (and its ad-buying agency) – and not­ the broadcaster – who is the real source of this practice? If an advertiser (or its agency) is willing to discriminate, what is to prevent it from lying to the broadcast station? In other words, irrespective of a licensee’s certification, the underlying discriminatory practices may still be going on outside the Commission’s reach.

Unfortunately, as with most other ostensibly simple “yes/no” certifications, the bad news is that nothing is quite as easy as it may seem at first.

For example, the Commission declined to provide, for purposes of illustration, the text of an approved nondiscrimination clause. So we don’t know for sure exactly what the FCC has in mind when it refers to nondiscrimination clauses. Of course, the clause should clearly articulate that the licensee has a policy of nondiscrimination, but what kind of additional detail (if any) might the Commission be looking for?

At least one minority-oriented public interest organization has informally circulated a model clause that, in the organization’s view, satisfies the new FCC policy. The suggested language provides that, in the placement and scheduling of, and compensation for, advertisements, there shall not be discrimination on the basis of race, color, religion, sex, national origin, or language spoken by the broadcaster’s audience; it also includes a separate clause, designed to implement the nondiscrimination policy. That separate clause would require periodic reports, notices to employees, training in nondiscriminatory policy compliance, etc.

In our view, provisions of this type are unnecessarily broad in scope and could potentially open the door to claims against broadcasters who contractually agree to these standards but who subsequently fail to follow-through in practice with the requirements. We also think that overly-complicated and detailed nondiscrimination clauses and overly-burdensome compliance requirements could scare away potential advertising clients at a time when the radio business in particular is facing declining revenue.

As an alternative, we suggest a somewhat more pragmatic approach to compliance, keeping it simple by sticking with the wording of the Commission’s diversity order and not overly elaborating upon it with any unnecessary requirements. For example, the following clause would appear to comply with FCC’s policy:

NONDISCRIMINATION POLICY: [Insert name of broadcaster] and its station[s] do not discriminate in advertising contracts on the basis of race or gender. Any provision in any order or agreement for advertising that purports to discriminate on the basis of race or gender, even if handwritten, typed, or otherwise made a part of a particular contract, is hereby rejected.

[Blogmeister’s Update: In March, 2010, the FCC issued an “Erratum” in which it tweaked – long after the fact – its language in the Diversity Order about nondiscriminatory advertising contracts. The tweak? Strike the word “gender” and replace it with “ethnicity”. Read all about it in this post from April, 2010. In view of that change, it might be a good idea to revise the language of any nondiscrimination clause that might have been drafted based on the FCC’s original language.]

It is also unclear how this new policy will apply to existing advertising contracts. As mentioned earlier, the policy is to be implemented through certifications in routine license renewal applications: when your next renewal application comes due in a couple of years, you will be required to certify that your advertising contracts contain nondiscrimination clauses. But let’s say you have a standing order with a client for weekly spots that began on January 1, 2008, and runs through the end of the year, with the only paperwork being an contract/order form that was signed in January before the new policy took effect – will that agreement be covered by the certification you will be required to make in 2012 (or whenever your next renewal application happens to be due)?

To be abundantly clear that you are in compliance, in addition to starting to add a nondiscrimination clause to all new contracts, you should consider sending out a mailing to all existing advertisers (including your national rep firm, if you have one) amending your current contracts to include this new clause. Perhaps when we see the revised renewal application Form 303-S and the instructions regarding this issue, it will be clearer exactly what the compliance certification will require regarding existing agreements.

Finally, we are constrained to observe that there is a bit of irony in the approach the FCC has taken with this new policy. Presumably, when station license renewal time rolls around, if a licensee is unable to certify in its renewal application that its advertising contracts contain the required nondiscrimination clause, the FCC will delay approval of the application and either admonish the licensee or possibly seek to impose a monetary fine for failure to comply with this policy. That has been the FCC’s course of action when dealing with certifications regarding public file rule requirements, for example, in the last round of license renewals. But what if the licensee’s station is broadcasting an urban or a Spanish-language format – the precise type of format this policy is designed to protect and encourage? Will the FCC still punish such licensees for failing to have nondiscrimination clauses in their advertising agreements? We shall see.