Broadcast and Cable Television:

Requirements for Identifying Sponsored Programming Should Be Clarified

GAO-13-237: Published: Jan 31, 2013. Publicly Released: Feb 28, 2013.

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What GAO Found

Sponsorship identification statutes and regulations, overseen by the Federal Communications Commission (FCC), require broadcasters to identify commercial content--usually an advertisement, an embedded advertisement, or a video news release--that has been broadcast in exchange for payment or other consideration. A written or verbal sponsorship announcement must be made at least once during any sponsored commercial content except when the sponsor is obvious. For content considered political or that discusses a controversial issue, broadcasters must follow all requirements for commercial content and additional requirements, such as identifying officials associated with the entity paying for an advertisement. In addition, the Federal Election Commission (FEC) enforces federal election law that requires all political communications for a federal election, including television and radio advertisements, to include a disclaimer statement. FEC also oversees requirements to report campaign funding and expenditures, including funding for political advertising. FCC has guidance that helps broadcasters determine when a sponsorship announcement is needed, such as when a deejay receives a payment for airing specific content. While broadcasters consider this guidance useful, it addresses older technology that in some cases is no longer used. Furthermore, some broadcasters indicated that it would be helpful for FCC to clarify how the guidance applies in some situations, such as when a video news release or product is used during programming.

According to FCC, it opened 369 sponsorship identification cases representing just over 1 percent of the Investigations and Hearings Division's total cases opened from the beginning of 2000 through 2011. In 22 of these cases, FCC issued enforcement actions with varying types of violations and enforcement actions. While FCC follows standard procedures when addressing complaints, it does not inform the broadcaster named in the complaint of the outcome of the investigation in many cases. Most broadcasters we spoke with confirmed that FCC does not inform them of the status of investigations, and some indicated they currently do not know the status of several investigations. According to FCC, it does not communicate status with broadcasters named in complaints because, among other reasons, it has no legal obligation to do so. Broadcasters reported the lack of information about cases and FCC decisions creates uncertainty about the propriety of their past actions. As a result broadcasters might not have sufficient information to determine whether they should modify their practices. This can result in stations' editing content because of unwritten regulatory policy or what they assume the policy to be. Moreover, these investigations can be lengthy, taking from 10 months to over 5 years to complete when an enforcement action is involved. From 2000 through May 2012, FEC opened 301 cases based on complaints alleging violations of political advertisement disclaimer requirements. FEC assessed civil penalties in 29 cases, 7 of which were related to television or radio advertisement disclaimers. Unlike FCC, FEC provides status updates to those involved in investigations and issues reports explaining investigation findings. FEC also issues reports explaining case dismissals. These reports can clarify acceptable and unacceptable practices for the regulated community.

What GAO Did This Study

The FCC is responsible for ensuring that the public knows when and by whom it is being persuaded. Requirements direct broadcasters to disclose when a group or individual has paid to broadcast commercial or political programming. Political advertising must also comply with requirements overseen by the FEC. Recognition of sponsored programming has become increasingly difficult because of new technologies and increased access to sponsored programming such as video news releases. GAO (1) describes requirements for sponsorship identification and federal election disclaimers and stakeholders' views of the requirements and (2) assesses how and to what extent FCC and FEC address complaints. To conduct the work, GAO reviewed relevant laws, guidance, and enforcement procedures, and interviewed agency officials and stakeholders about enforcement processes and actions.

What GAO Recommends

FCC should, among other things, update its sponsorship identification guidance and consider providing additional examples relevant to more modern issues and communicate the resolution of an investigation to the target of the investigation when a letter of inquiry has been sent, and develop goals for resolving all sponsorship identification cases within a specified time frame. GAO provided FCC and FEC with a draft of this report. FCC indicated it will consider the recommended actions and how to address the concerns discussed in the report. Both FCC and FEC provided technical comments.

For more information, contact Mark Goldstein at (202) 512-2834 or goldsteinm@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Comments: In August 2017, GAO contacted FCC for an update on this status of this recommendation, but received no information from the agency.

    Recommendation: To provide clarity on how sponsorship identification requirements apply to activities not directly addressed by FCC's current guidance, such as the use of video news releases, and to update its guidance to reflect current technologies and recent FCC decisions about video news releases, the Chairman of the FCC should initiate a process to update its sponsorship identification guidance and consider providing additional examples relevant to more modern practices.

    Agency Affected: Federal Communications Commission

  2. Status: Closed - Implemented

    Comments: The Federal Communications Commission (FCC) is responsible for ensuring that the public knows when and by whom it is being persuaded. Federal law requires broadcasters to disclose when a group or individual has paid to broadcast commercial or political programming, which FCC implements through regulation. FCC investigates complaints about potential violations of the sponsorship identification requirements. If FCC's review determines a violation may have occurred, FCC will send a letter of inquiry to the broadcaster named in the complaint initiating an in-depth investigation. In January 2013, GAO found that while FCC follows standard procedures when addressing complaints, it does not inform the broadcaster named in the complaint of the outcome of the investigation in many cases. Most broadcasters GAO spoke with confirmed that FCC does not inform them of the status of investigations, and some indicated they did not know the status of several investigations. According to FCC, it does not communicate status with broadcasters named in complaints because, among other reasons, it has no legal obligation to do so. Broadcasters reported the lack of information about cases and FCC decisions creates uncertainty about the propriety of their past actions. As a result broadcasters might not have sufficient information to determine whether they should modify their practices. This can result in stations' editing content because of unwritten regulatory policy or what they assume the policy to be. Therefore, GAO recommended that FCC communicate the closure of all sponsorship identification investigations with the broadcaster named in the complaint after a letter of inquiry was sent. The letter should indicate the case has been closed, but in doing so, FCC could note that closing the case does not signify an endorsement of the actions that were being investigated and that the case could be reopened. In 2017, GAO confirmed that FCC changed its practices for notifying investigation subjects about the status of investigations. Specifically, FCC's enforcement handbook includes instruction to staff to notify the subject of an investigation via letter that FCC is closing the investigation if FCC has decided not to pursue an enforcement action, and if that subject has become aware of an investigation. FCC officials said that subjects of an investigation may become aware of the investigation because the subject received a letter of inquiry from FCC. Officials said this notification procedure applies to sponsorship identification cases, as well as other enforcement cases handled by FCC's Enforcement Bureau. FCC provided GAO examples of letters showing that FCC has implemented this notification process. As a result, FCC has provided greater transparency about its investigations in general, and broadcasters specifically should have greater clarity about allowable practices.

    Recommendation: To improve its transparency concerning which investigations are ongoing or have been concluded and to provide guidance on allowable activities, the Chairman of the FCC should communicate the closure of all sponsorship identification investigations with the broadcaster named in the complaint after a letter of inquiry was sent. The letter should indicate the case has been closed, but in doing so, FCC could note that closing the case does not signify an endorsement of the actions that were being investigated and that the case could be reopened.

    Agency Affected: Federal Communications Commission

  3. Status: Closed - Implemented

    Comments: The Federal Communications Commission (FCC) is responsible for ensuring that the public knows when and by whom it is being persuaded. Federal law requires broadcasters to disclose when a group or individual has paid to broadcast commercial or political programming, which FCC implements through regulation. FCC investigates complaints about potential violations of the sponsorship identification requirements. If FCC's review determines a violation may have occurred, FCC will initiate an in-depth investigation. In January 2013, GAO reported that FCC sponsorship identification investigations can be lengthy, taking from 10 months to over 5 years to complete, according to FCC data from 2000 through 2011 that GAO reviewed. The process to negotiate a consent decree takes longer because it often involves complex negotiations between FCC and a broadcaster. According to FCC officials, even when the investigation sends a letter of inquiry and results in no enforcement action, the median length of time to close investigations was 38 months for approximately 200 cases. In 2011, FCC set a performance goal to resolve 90 percent of sponsorship identification cases within 15 months. According to FCC officials, FCC missed its goal by a few days although officials could not provide data to support this. Specific goals about timeliness of investigations provide better service for regulated entities, but in 2012 and 2013 FCC removed this goal. In an effort to achieve greater openness, the timeliness of reporting and publishing information has been identified as an essential component. By re-establishing goals about completing sponsorship identification investigations in a timely manner, FCC would support broader government goals of completing actions in a timely manner to better serve its constituencies and regulated entities. Therefore, GAO recommended that FCC develop goals for completing sponsorship identification cases within a specific time frame and develop a means to measure and report on how well it meets those goals. In 2017, GAO confirmed that FCC updated its enforcement handbook to include target timeframes for completing investigations. The timeframes vary depending on the type of case. FCC's system for tracking its cases notifies staff about cases that have not been closed within these target timeframes. As a result, FCC is in a better position to improve the timeliness of investigations and ensure, when possible, that investigations are completed in an expeditious manner.

    Recommendation: To improve timeliness of investigations and ensure, when possible, that investigations are completed in an expeditious manner, the Chairman of the FCC should develop goals for completing sponsorship identification cases within a specific time frame and develop a means to measure and report on how well it meets those goals.

    Agency Affected: Federal Communications Commission

 

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