A Proposed Fine of $13.4M for Undisclosed Sponsored Content Serves as a Warning to Other Broadcast Stations

As we closed the books on 2017, the FCC announced that it plans to fine Sinclair Broadcast Group Inc. a record $13.4M, for having not adequately disclosed sponsored content in its programming. The fine was calculated by the FCC based on over 1,700 instances – across 64 of Sinclair stations – where the FCC found Sinclair to be in violation of Section 317(a)(1) of the Communications Act, which requires identification of anyone who has paid for broadcast programming. That adds up to roughly $7,700 per violation. Guess someone was on the FCC’s naughty list.

While many might be inclined to gloss over this decision as a one-off that is only notable for the size of the fine, it can also be viewed as a clear signal that the FCC is getting tough on sponsorship identification generally and possibly elevating it higher in the Commission’s list of enforcement priorities.

With this Notice of Apparent Liability (NAL), the Commission has forcefully underscored the continued importance of the statutory requirement that all broadcast stations are transparent about who are attempting to persuade their listeners or viewers. This longstanding requirement applies to all broadcasts of any length where any compensation, in cash or in kind, has been provided to a station in exchange for a broadcast. While the amount in question is higher than prior cases, that alone shows that the FCC is taking this issue seriously.

The FCC began to look into the matter of potential undisclosed, paid content on Sinclair stations in April 2016 when it received an anonymous complaint which alleged that the cancer foundation Huntsman Cancer Institute (HC) was paying for favorable news coverage and programming on Sinclair and other stations. The content that got Sinclair in trouble was varied in length. Some ran as short news of approximately one minute in length, but Sinclair also broadcast as many as 71 full-length programs. Sinclair did not include a clear identification of any of them as being sponsored, even though Sinclair had an arrangement whereby it would receive compensation for these broadcasts. The problem is that programming that appeared to be chosen by the station on its own was not.

Photo courtesy of the Creative Commons License

As the NAL says,

Our action today advances the Commission’s longstanding goals of protecting consumers by ensuring they know who is attempting to persuade them and protecting broadcasters and sponsors from unfair competitors that fail to abide by our disclosure rules. When a broadcast licensee fails to disclose the sponsor of paid programming, it may mislead the public into believing the paid broadcast material is a station’s independently generated news or editorial content.

Adding to its problems, according to the NAL, Sinclair also distributed the sponsored programming to 13 non-Sinclair stations and failed to tell the licensees of these receiving stations that the programing was sponsored. Thus, those licensees also did not include sponsorship identifications and did not “provide viewers with facts they may find crucial in evaluating the credibility of the programming.” However, Sinclair argues that sponsorship should have been plain from the content of the programming, such as when a well-known company airs an ordinary commercial spot. The Commission rejected that claim, as it found the identification insufficiently clear in context. The NAL noted that “[b]ecause the plain objective of the Act, then, is fully frustrated by an incomplete disclosure, a full forfeiture is warranted.”

In his separate statement attached to the NAL, Chairman Pai noted that this was “the largest forfeiture in the history of this agency for violation of our sponsorship identification rules.” It is clearly meant to send a message as to the importance of paying attention to revealing paid content.

The Commission was not unanimous, however, as to the size of the proposed fine for Sinclair. In fact, Commissioners Clyburn and Rosenworcel dissented from the NAL because the fine is not high enough.  As Commissioner  Clyburn said,

… the ‘punishment does not fit the crime’ against a company that grossed more than $2.7 billion in revenue last year. … For all the above reasons, while I agree with the FCC acting against Sinclair for violating the FCC’s rules, I dissent because of such a meager fine, which fails to match the scope and egregious nature of the violations that were committed.

If you have questions about sponsored content on your broadcast station, reach out to one of our attorneys who can help guide you through the process so you’re not stuck with a hefty fine.