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

The Enforcement Bureau has agreed not to consider any of the alleged messiness in any regulatory context. In other words, no matter how bad the misconduct may have been – and, again, Univision Radio has admitted to no misconduct at all – Univision need not worry about it as far as the FCC is concerned.

Meanwhile, out on the Left Coast, Univision Services, Inc. (the successor-in-interest to UMG) has copped a plea to criminal mail fraud in connection with a scheme “to defraud radio stations”. The fraud involved payments by UMG to various station employees in return for airplay of UMG music; the stations were defrauded because the under-the-table payments meant that the stations could not themselves get those payments in return for airplay which would, theoretically, have been the subject of proper IDs.

While the U.S. Attorney obviously had extensive, compelling evidence of UMG’s guilt, the plea documents make clear that the misconduct was limited to UMG and apparently did not infect the remainder of the extensive UCI operation. According to the plea agreement, “the government’s investigation has not discovered evidence that any officers, directors, or employees of UCI . . . were aware or had reason to be aware of the illegal conduct occurring at UMG.”

So let’s get this straight. Executives and employees of UMG – which is not an FCC licensee and is technically no longer in existence – admitted to making payments in the hope of receiving airplay. And even though there’s apparently no evidence linking that misconduct to others in the Univision organization, it’s still worth $1,000,000 to buy an Invincibility Cloak protecting Univision interests from any further regulatory unpleasantness potentially arising from that misconduct.

As strange as all this sounds, the deal makes sense. Putting an absolute lid on this problem before it metastasizes has considerable value. Since the available evidence of misconduct somewhere in the Univision operation (i.e., chez UMG, in particular) was, it seems, overwhelming, it was probably just a matter of time before petitioners, objectors, and other unfriendlies would start to wield that evidence against Univision’s licenses. As a matter of self-preservation, better to plunk some cash down now, get your immunity, and move on.

It remains to be seen whether the FCC will pursue this matter further against any non-Univision stations whose call signs may have popped up in the investigation. Recall that UMG, the admitted culprit, was accused of spreading pay-for-play cash around a bunch of non-Univision stations. Neither the plea agreement nor the consent decree directly absolves or condemns any other stations (although the plea deal does indicate that the UMG payola scheme was designed to keep other station owners in the dark). But since the matter is still pending at the FCC, those other stations that received LOIs will have to wait and see if this is the end of the matter.

The complaint does not identify any stations or station personnel. But it appears that, in the two years since the complaint was filed, some names and call signs have surfaced in the lawsuit. More importantly, it looks like those names and calls have found their way to the Commission. The Enforcement Bureau’s inquiry letter to at least one station states that that station “is specifically mentioned in the [Mireles] lawsuit as having participated in the payola scheme”.

The Bureau’s letter asks standard questions relating to charges of payola as well as questions concerning, for example: (1) the station’s relationship with, among others, Univision Music Group, and (2) the station’s own internal policies and practices relating to awareness of and compliance with the sponsorhip ID rules. The letter also requires that the licensee turn over any responsive documents it might have in its files.

Of course, regardless of what may or may not have surfaced in Mireles’s litigation, at present it appears that all we have on the table are allegations, pure and simple. As far as we can tell, Mireles’s case has not to date generated any findings of misconduct by any radio station or station personnel and, of course, much more than mere allegations is needed to justify the imposition of any penalty.

It’s not clear where this is going or how long it will play out. Just last year, the Commission shook a grand total of about $10 million out of Clear Channel, Entercom and CBS in “voluntary contributions” arising from the Spitzer-triggered payola inquiries launched a year or two earlier by the Commission. Whether the FCC will have similar luck this time around remains to be seen.

The NOI/NPRM also specifically mentions the possibility of "concurrent" sponsorship ID's, by which it presumably means some disclosure to be made to the audience simultaneously with the embedded product reference.  How such concurrent mentions might work for radio programming (and yes, the NOI/NPRM is directed to both TV and radio) is not at all clear.  And while concurrent mentions might strike one as obviously intrusive and distracting on television, the Commission notes the "apparently common existing practice of superimposing unrelated promotional material at the bottom of the screen during a running program", and suggests that that practice undercuts any claim that concurrent announcements would infringe on the program's artistic integrity.

The Commission has demonstrated an overheated interest in "sponsorship identification" for the last several years - recall the multiple VNR inquiries, as the most obvious example.  The NOI/NPRM is in line with that interest, but it extends it in a way which could have a serious adverse impact on broadcast operations.  Having to determine which products happen to be identifiable by commercial design, and then having to announce each of those products concurrently with their on-air appearance, would likely create a substantial impediment to the development and broadcast of programming.  Imagine, for example, what a TV screen would look like during an NFL or MLB game, when every piece of logo-identifiable athletic gear (helmets, shoes, bats, balls, gloves, shirts, etc., etc.) and every off-field amenity (Gatorade, Motorola, etc.) would presumably be subject to the sponsorship ID requirement.  And let's not even start to talk about a NASCAR race.

One might also legitimately ask what purpose would be served by such a requirement?  While the NOI/NPRM invokes the "public's right to know who is paying", the NOI/NPRM does not dwell on the questions of whether the public is perhaps smart enough to realize that the Coke cups in front of Paula, Simon and Randy aren't there by accident, or that there is a reason that Nike has chosen to put its logo where it does.  At bottom, the Commission appears to assume that there is in fact some overriding public interest in requiring sponsorship identification - but the Commission fails to explore exactly what that public interest might be. Increased regulation of embedded advertising will inevitably draw the Commission even more deeply into content regulation than it has previously ventured - and, as a result, the Commission will be drawn even closer to obvious First Amendment issues that should not, cannot, be resolved by broad platitudinous references to "the public's right to know".

Ideally, the Commission will in the end seek to avoid the treacherous constitutional waters toward which it has set sail.  But if it does not, the substantial burdens on broadcasters which would likely flow from increased sponsorship ID requirements, combined with the substantial content-regulation that would necessarily accompany such requirements, will ultimately require far greater justification than the Commission has thus far demonstrated.

The comment and reply comment deadlines for the NOI/NPRM have not yet been established.  Check back to our blog for updated information which will be posted when available.