Enforcement Bureau extracts half-million dollar “civil penalty” AND an extensive compliance plan commitment from Cumulus for spots which it didn’t even sell.

The Enforcement Bureau has scored another trophy for its burgeoning trophy room of extravagant penalties. This time, it’s $540,000 extracted from Cumulus for a supposedly inadequate sponsorship identification on a number of spots run on a station Cumulus didn’t own when the spots were purchased and didn’t own when the Bureau imposed the penalty. And despite the fact that it’s not entirely clear that any sponsorship ID violation actually occurred, Cumulus agreed to fork over half a million dollars and shoulder a number of other not insubstantial burdens as well.

The case raises a number of troubling questions.

The tale starts in May, 2011, when an FM station in scenic Dover, New Hampshire contracted to air a flight of spots promoting the Northern Pass Project, a controversial plan to build a 192-mile transmission line to bring power from Canada. The would-be builder: Northern Pass Transmission LLC (NPTLLC). The Consent Decree (CD) entered into by Cumulus and the Bureau isn’t especially detailed, but it says that the spots were “initially purchased by an affiliate of” NPTLLC. While the spots may have been “initially purchased” by an NPTLLC affiliate, it appears that NPTLLC paid for the spots.

The station’s staff was obviously aware that the spots had to include a sponsorship ID because, according to what Cumulus told the FCC, the staff “in fact inserted sponsorship identification information” when the spots were first ordered. And in so doing, the staff (according to Cumulus) “concluded in good faith and belief that the use of the phrase ‘Northern Pass’ in the announcements provided sufficient sponsorship identification.”

The spot flight ran from May into October, 2011. Bear in mind that, in May, the station was owned by Citadel. In mid-September, as an element of Citadel’s merger with Cumulus, Cumulus acquired control of the station’s licensee. About two weeks later, the Bureau received a complaint alleging that the station had failed to include a sponsorship ID on one of the Northern Pass Project spots. An investigation ensued.

A couple of years later Cumulus sold the station, but the investigation carried on. And finally, in January, 2016, Cumulus entered into the CD in which it: (a) acknowledged that the spots had violated the sponsorship ID rule; (b) agreed to pay a “civil penalty” of $540,000; and (c) committed to a multi-component Compliance Plan and reporting obligations for the next three years.

Here are some questions you may be asking yourself.

How come Cumulus got stuck with the penalty when it didn’t sell the spots originally? That’s easy. The FCC has a longstanding policy that, when you acquire control of a licensee (as Cumulus did here through the Citadel merger), you are responsible for the sins of the seller. That’s not necessarily so if you acquire the license of the station in an assets deal, as opposed to acquiring control of the licensee through a stock deal (in which case the station’s licensee remains the same but subject to the transferee’s control).

How come Cumulus got stuck with the penalty when it didn’t control the station when the CD was entered into? Again, that’s probably easy. Cumulus was responsible for the licensee when the investigation started, so it was the hook for any penalty. While the CD doesn’t expressly say so, it’s a pretty good guess that, when Cumulus sold the station a couple of years ago, the Enforcement Bureau probably required Cumulus to agree to stay on the hook as a condition to getting the deal through. In other words, the Enforcement Bureau could have imposed an “enforcement hold” which would have prevented the Media Bureau from processing the assignment application. When an enforcement hold is threatened, parties eager to move their transaction forward will often agree to remain potentially liable even after they have sold the station at which the violation(s) allegedly occurred. (Blogmeister’s Note: Whether such enforcement holds are technically legal is far from clear, particularly when the alleged violation would plainly not raise any question about the selling licensee’s qualifications to remain a licensee. But for a number of reasons the Enforcement Bureau’s practice has not been effectively challenged to date.)

Did the spots in question really violate the sponsorship ID rule? This one’s not so easy. As noted above, the CD indicates that the spots did include some sponsorship ID language referring, apparently, to “Northern Pass”. Since (also as noted above) the spots had been “initially purchased” by an “affiliate” of NPTLLP, that ID may have been a reasonable effort to notify listeners that the spots had been purchased by proponents of the Northern Pass project, a universe which presumably would have included NPTLLP. But the Enforcement Bureau’s position is that the ID “did not clearly identify Northern Pass Transmission LLC as the sponsor of the announcements.” That seems to indicate that, in the Enforcement Bureau’s eyes, the “sponsor of the announcement” is the source of the payment for the spots, and that source must be “expressly disclosed”. That’s not a far-fetched notion by any means; in fact, it’s generally consistent with one of the latest Media Bureau decisions in this area. But even if the term “Northern Pass” did not “expressly disclose” the precise source of the payments, it at least reflected an effort by the station to notify listeners about who arranged for the spot. Is that a real violation and, if so, did it merit a half-million dollar penalty? We might have been inclined to think not on both counts, but the Enforcement Bureau obviously disagreed.

How come Cumulus had to agree to a compliance plan involving a bunch of stations that had not been involved with this spot? Another good question. Since the original mistake relative to the ID was apparently made before Cumulus controlled the station, it’s hard to see why Cumulus should be deemed to be at fault here. (Sure, Cumulus continued to run the spot for about a month after it took over the station, but come on: having acquired a slug of stations through its merger with Citadel, during that first post-closing month Cumulus presumably had a lot of things to worry about other than one particular spot on one station in Dover, New Hampshire.) And if it wasn’t really at fault, why should Cumulus be saddled with developing, implementing and documenting a relatively onerous compliance plan affecting nearly 200 stations – none of which happened to be involved in the supposed violation? This really doesn’t seem to make much sense. But it appears that the Enforcement Bureau’s SOP when it comes to CD’s is to impose some such compliance plan obligation, presumably on the theory that, since the target licensee has admitted violating the rule, it should be subjected to some remedial educational effort to prevent a recurrence. That might make sense if the underlying facts suggested that the sponsorship ID violation had occurred through some internal flaw in Cumulus’s operational systems. But that doesn’t appear to have been the case here.

Why did the Enforcement Bureau handle this case and not the Media Bureau? This is another poser. Historically, questions (and complaints) relating to political programming have been handled by the Media folks. And the Enforcement Bureau’s own functions – as defined in the Commission’s rules – expressly state that Media has “primary responsibility” for such complaints. So how did this case happen to fall into Enforcement’s lap? We don’t know. (We do know that the Media Bureau was not involved in the matter, though: during our recent webinar featuring Bobby Baker, the Media Bureau’s political broadcasting guru, Bobby disclaimed any involvement at all in the CD.)

As a bottom line, it’s probably most likely that, regardless of whether it felt the penalty here was called for, Cumulus simply wanted to put an end to the investigation and was willing to live with the terms which it was able to negotiate with the Enforcement Bureau. Given the Bureau’s recent propensity for imposing “headline-grabbing” multi-million dollar penalties galore (a propensity to which Commissioner Pai, for one, has taken exception), Cumulus may have felt lucky to get off with a mere $540K whack. But for the rest of us, this case does not bode well. At a minimum, it signals that, when it comes to sponsorship ID’s on issue-related spots, it’s important to identify, “expressly”, the precise source of the payments for the spots. We have all been warned.