$115,000 consent decree for questionable “Special Reports” on Las Vegas TV station

The fake news business appears to have been booming in 2009 – at least as far as we can tell from a couple of FCC enforcement actions. Last February we reported on a $44K fine issued to a Chicago radio station for airing, in 2009, a number of bought-and-paid-for announcements gussied up to sound like newscasts. And now the Enforcement Bureau has announced a consent decree with a Las Vegas TV licensee, the terms of which call for payment of a $115,000 “civil penalty” for the broadcast of some 2009 “Special Reports” that (a) looked a lot like news but (b) were apparently bought-and-paid-for as well.

Don’t let the fact that it took the Bureau five years to lower the boom on these stations distract you: that just demonstrates that the current Commission intends to enforce the sponsorship identification rules aggressively, regardless of when the violations may have occurred.

The sponsorship ID rule (Section 73.1212) is mandated by Section 317 of the Communications Act, which requires that broadcasters identify whoever is paying for the broadcast of any matter. To that end, Section 73.1212 requires that stations “fully and fairly disclose the true identity” of anybody paying to have any particular content broadcast.

Precisely what the Vegas station (KTNV-TV) did is not clear from the consent decree, which summarizes the violations only as follows:

KTNV-TV accepted payment from the dealerships to produce and air several versions of what KTNV-TV called a “Special Report” about the liquidation at the dealerships. The “Special Reports” were formatted in the style of a news report and featured a KTNV-TV employee who, in the manner of a television reporter, questioned representatives of the dealerships about their ongoing liquidation sales events.

A 2009 report on the Las Vegas Review-Journal website provides a bit more context. It appears that an advertising agency representing some local car dealerships approached stations in the market with a proposal: the dealerships would buy a flight of conventional ads, but in addition the station would be expected to insert into their regular programming a series of on-site “news interviews” that would “promot[e] the liquidation sale of cars whose franchise had been cancelled by” the auto manufacturer. (Remember that this was 2009, when the car business wasn’t doing so well.)

It’s not clear whether the “news interviews” were to be scripted by the ad agency (or the dealerships), or whether that was left to the station. But what does appear clear is that the agency was insisting on some type of “news interviews” to be broadcast by the stations over and above the standard spots that were also to be broadcast. One station advised that it had been warned by the agency that “if you cannot guarantee the news coverage, you won’t get that buy.”

And sure enough, in the Review-Journal article, a KTNV-TV official was quoted as acknowledging that “the advertising agency representing the client at issue did request news coverage for the client as part of the advertising buy, [but] KTNV declined to provide such news coverage.” That denial, however, is contradicted by the Consent Decree, in which KTNV-TV admits that the “Special Reports” – which presumably were the “on-site news interviews” – “were not in fact news coverage, but instead paid advertisements”. (In its initial response to the FCC, KTNV-TV had argued that, while the interviews were indeed ads, the “context” of the interviews made it clear that they were ads – a claim the Bureau declined to accept.)

We’re guessing that the agency tried to pitch the deal as essentially rewarding stations for covering news – i.e., the liquidation of car dealerships as a result of the recession – that the stations would be covering anyway. And such rewards could be completely legal – IF the coverage (i.e., the “on-site news interviews”) had been properly identified to viewers as having been paid for.

This underscores the need for stations to be completely upfront with audiences when it comes to programming for which any consideration has changed hands.

Of course, this puts a station involved in such a deal in something of a bind. Suppose, for example, that its news department determined – independently of any advertising deal the station’s sales department might have cooked up – that an interview with a car dealer about liquidation sales was newsworthy. The news department might legitimately believe that that interview would not have to be tagged with a sponsorship ID. But if the station can be shown to have agreed to broadcast some such interviews as part of an advertising package, how is the public – and the FCC – going to know which interviews are paid for and which aren’t?

All of which counsels strongly against any kind of ad deal that would require the station to broadcast material – and particularly material dressed up to look like “news” – without including a sponsorship identification.

A note about the amount of the “civil penalty”. In the case from last February, the Bureau calculated the fine based on a standard amount ($4,000) per violation, and each separate untagged newscast was deemed a violation – so the licensee there was charged $44,000 for 11 violations. In the Vegas case, the licensee copped to 27 violations which, at $4K a pop, would come to $108,000. Since KTNV-TV will be paying $115,000, did it get a bad deal? Maybe, maybe not.

By entering into a Consent Decree, the licensee has effectively closed the book on this investigation: no more FCC questions, no more legal bills, no more hassles. That could easily be worth the $7,000 differential between what it’s paying and what the apparent rack rate for its violations would have come to. Of course, it did agree to a “compliance plan”, which will require some ongoing effort (e.g., appointment of a “compliance officer”; development and implementation of a “Compliance Plan” and “Compliance Manual”; “education” of sponsors regarding sponsorship ID; a series of reports to the licensee’s Board of Directors and the FCC). While that might impose some day-to-day hassles, that’s a non-cash cost. Ultimately, the bottom line apparently made sense to KTNV-TV.

And for everybody else, the bottom line should be an acute awareness that the sponsorship ID rules are alive and kicking and the FCC’s Sponsorship ID police are prepared to bring the hammer down hard when those rules are violated.