Online Records Expose Stations' Sloppy Political Ad Files

Law360 (October 13, 2020, 9:15 PM EDT) -- As the U.S. navigates a contentious presidential election season, the Federal Communications Commission has been quietly forcing radio broadcasters to clean house with an industrywide audit of stations' reporting requirements for political advertisements that has so far yielded nearly 80 settlements.

Attorneys who worked on the cases say a recent shift to online recordkeeping exposed widespread compliance problems among radio stations and spurred productive conversations about how all stations can be more transparent going forward.

"This was a very good example of regulators and the industry working together to make sure the interests of both were considered," said Kathy Kirby, a Wiley Rein LLP partner who represented large stations in the settlement process.

According to the FCC's website, radio and TV stations must post information about would-be political ad purchasers to their public files "as soon as possible" when a station receives an airtime buy request, either from a qualified federal, state or local candidate, or an issue advertiser seeking to broadcast "a message relating to any political matter of national importance."

The disclosures must include whether the request for ad time was accepted, how much the advertiser was charged, and descriptions of when the ad will air and what candidate or issues it promotes.

An FCC spokesperson told Law360 that the agency has released 79 consent decrees for violations of these rules since July, and that it "anticipates releasing additional ones because the radio renewal cycles are ongoing."

The current probe originated in late 2018 when an undisclosed federal candidate complained to the FCC that they were overcharged for political ads by three New York stations owned by Entercom, a company that runs over 200 radio stations across the U.S. So far the audits have affected only radio stations, but TV stations could face similar audits now that the renewal cycle for television licenses is underway.

Over the course of its investigation, the FCC found that the three stations uploaded no political ad records that year, "despite the fact that the 2018 midterm elections had been held earlier in the year and it was reasonable to assume that the stations had broadcast at least some candidate-related advertising during the period leading up to the elections," according to the Entercom consent decree.

Ultimately, the FCC's investigation found that nearly 200 of the broadcaster's 234 stations had not complied with the political file rules. Entercom and five other major broadcasters signed agreements with the FCC in July to settle the findings of noncompliance. Since then, dozens more radio stations have followed suit.

The honor system that the FCC ended up with does not itemize specific violations and does not financially penalize stations for their noncompliance. Instead, stations must retroactively report on activity surrounding the Nov. 3 election and submit to industrywide compliance training programs.

The National Association of Broadcasters, which represented the industry in the negotiations with the FCC, stepped in to develop the training programs and a compliance manual template to keep stations on the right side of the FCC's rules. "The template provides an overview of the rules, suggests operating procedures to promote compliance and includes checklists designed to help stations correctly upload the required information about political ads," an NAB spokesperson told Law360.

According to David Oxenford, a Wilkinson Barker Knauer LLP partner who represented small radio stations in the process, the consent decree strategy serves the overall goal of ensuring compliance with FCC rules as broadly and quickly as possible.

"This does provide a way for the FCC to ensure compliance without a protracted legal battle with these licensees and without monetary fines on these licensees," he said. "Instead, both the larger and the smaller broadcasters have all agreed to consent decrees that require them to stay in compliance with the FCC's political broadcasting rules."

Oxenford also agreed that the move to wholly online recordkeeping shined a light on long-running issues rather than creating new problems. The FCC finished migrating radio stations to online regulatory recordkeeping in early 2018, which meant that "the public file that has historically been kept at the station, local cable office, or headquarter office [is now] made available online at the commission."

The still-new filing requirements coincided last year with the latest round of radio station renewal applications, which also necessitated closer scrutiny of stations' recordkeeping practices.

"There's no question that [with] the public inspection files being online, it's a lot easier to find out that there are violations or for people to review those files [than] when they're in a filing cabinet in the corner of some of these main studios," Oxenford said. "Especially in some of these smaller stations, nobody ever looked at them."

Broadcast attorneys told Law360 that the online transition — which time-stamps when documents are filed — and the consent decrees brought more clarity to how the FCC expects broadcasters to comply with the requirement that political files be updated quickly.

"The rules themselves don't say when a document needs to be placed into the public inspection file. It says 'promptly,' which in most cases means immediately, but neither promptly or immediately is defined," Oxenford said.

Now, the FCC has made clear that for compliance purposes, new political file information must be filed within one business day of receipt of a request for ad time.

Wiley Rein's Kirby said that the exercise "presented a great opportunity for broadcasters to ask the FCC questions about pieces of its rules that weren't entirely clear and to be more consistent with compliance in that manner."

It also makes sense that the FCC's increased scrutiny of online political files coincided with the 2020 general election, Oxenford said.

"This is the first presidential election, certainly, where the online requirements are there fully for the political files, so I think that also contributed to some of the problems," Oxenford said, although he emphasized that stations' violations were largely trivial.

For example, many stations self-reported filings that were just a day or two overdue, and many small stations receive few — if any — national political advertisements.

"The importance is different depending on the size of the market," he said.

One market that could raise eyebrows is Hubbard Radio LLC's six-station cluster in the Washington, D.C., area.

Andrew Jay Schwartzman, senior counselor at the Benton Institute for Broadband & Society, called the stations a political advertising "gold mine" because they target a unique audience in the nation's capital and sometimes specifically direct ads at members of Congress and their staffers.

While Schwartzman acknowledged that "for the most part, most broadcasters are now complying with the requirements," he expressed concern that the FCC settlements didn't spell out the specific violations that occurred.

"The price for having such a valuable property is that they have some very modest obligations to serve the public interest, and one of them is keeping the public files up to date," Schwartzman said. "We don't know how bad these violations were, and I fault the commission [for] their lack of transparency in that regard."

However, Kirby cast the consent decrees as an acceptable compromise to promote both accessible records and quick compliance.

"The FCC's got a very compelling interest in ensuring transparency with respect to political advertising spending," she said. "They listened to the concerns of the industry about burdens on stations and also took broadcasters at their word when they pledged to make improvements."

Update: This story has been updated with a quote from NAB.

--Editing by Breda Lund and Emily Kokoll.

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