Prompt delivery is a material term of contests, according to Commission

If you’re a broadcast licensee thinking about conducting a contest for your audience, heads up. The Commission has just made clear that it expects you to get the prizes into the winners’ hands “promptly”. The failure to do so – or maybe the failure to promote the fact that you’re going to do so (the FCC’s reasoning on this point isn’t a model of clarity) – could cost you an extra $4,000. 

Of course, the FCC’s contest rule – Section 73.1216 – doesn’t say exactly how long the licensee has to award prizes. In fact, the rule doesn’t address that question at all. But in a recently released Order on Review, the Commission held that a licensee’s apparent foot-dragging in the prize delivery department violated the rule nevertheless.

The issue arose in a contest conducted by a radio licensee back in 2005. The grand prize was a two-year lease on a car (or cash equivalent), plus a “trunk load full” of unspecified “Aerosmith memorabilia”. It’s not clear what that “memorabilia” was supposed to include, but it may be safe to assume that the real grand prize was the car lease, which was valued at $8,000.

The contest was held, a winner was selected in July, 2005, and within about a month the cash was paid to said winner. No problem so far. But what about the Aerosmith stuff? By the following New Year’s Eve, no Aerosmith paraphernalia – um, that’s probably not an appropriate term – no Aerosmith merchandise had been delivered, so the winner complained to the FCC, which in turn asked the licensee what was up with that part of the prize. Sure enough, the Aerosmith stuff landed on the winner’s doorstep in early February, 2006, within a week or two of the FCC’s inquiry.

Even though the prize was in fact awarded, the Enforcement Bureau concluded that the Aerosmith memorabilia had not been awarded “promptly”, and declared that to be a violation of the contest rule. The licensee objected and now, six years after the contest was held, the Commission has agreed with the Bureau.

Bear in mind that the Commission’s terse contest rule says merely that licensees “shall fully and accurately disclose the material terms of the contest, and shall conduct the contest substantially as announced or advertised.” It also says that the contest’s “material terms” should not be false, misleading or deceptive. Since the licensee apparently hadn’t figured that the precise delivery time of the prize was a “material term” – delivery time not being mentioned anywhere in the rule – the contest’s rules and promos didn’t address that factor one way or the other. As a result, while the seven-month delivery time on the Aerosmith component of the prize may have been a bit on the slow side, it was not inconsistent with announcements or ads about the contest. As the licensee saw it, promptness in the awarding of prizes was not required by the FCC’s contest rule.

The Commission, however, sees things differently. In its view, even though Section 73.1216 makes no reference to the promptness of prize delivery, that notion is encompassed within the concept of “material terms” and is therefore somehow covered by the rule. The Commission summarizes its analysis as follows (we’ve left off the footnotes): 

the contest rule contemplates the existence of material terms other than those specifically listed therein; the Commission has previously stated that prizes must be awarded promptly; and the law is clear that the Commission may properly interpret its own rules consistent with existing regulation.

But is that “analysis” valid? The Commission seems to be penalizing the lateness of the prize delivery, but its rule merely mandates that all material terms of a contest be accurately disclosed and complied with. In this case the licensee had not disclosed anything about prize delivery, so it can’t be accused of inaccurate disclosure. And in the absence of any disclosure (accurate or otherwise), the licensee can’t be accused of failure to comply. The most that might be said is that the licensee failed to disclose a material term, but that doesn’t seem to be the basis for the FCC’s fine.

The bottom line here seems to be that the Commission expects prizes to be awarded “promptly” – whatever that means – and therefore such promptness is automatically a “material term” of any and all contests. While the Commission’s decision stops well short of any detailed analysis, by implication it suggests that reference to prize delivery must be disclosed, along with all other material terms, in on-air announcements (even though the Commission’s decision does not seem to whack the licensee for its failure to do so in this instance). And that, in turn, would ordinarily mean that a failure to award a prize “promptly” constitutes a failure to comply with a material term.

While reasonable folks might disagree with the way the Commission ultimately reaches the result in this case, the fact is that the Commission has now spoken: “prompt” delivery of prizes is a “material term”. Since the contest rule requires that all material terms of a contest be accurately disclosed and implemented as announced, it’s fair to understand that prompt prize delivery must be disclosed and implemented in some (but not necessarily all) contest promotions. This may come as news to many, maybe most, licensees – we’d be willing to bet that the vast majority of licensee-conducted contests have historically made no reference at all to the anticipated date of prize delivery.

All you contest promo writers, take heed . . . and good luck.