The FCC on Friday proposed to amend its rules governing contests conducted by broadcast stationsby allowing the required disclosure of the material terms of the contest on the Internet, as an option for broadcasters in lieu of the current requirement that these disclosures be made by broadcasting them on-the-air a reasonable number of times.  But the proposed rule change is not as simple as one would think, with the FCC asking about whether a number of specific obligations should be attached to any online disclosures, even potentially adding the requirement that the full URL for the online disclosure be made every time a contest is mentioned on the air, not simply a reasonable number of times as required under the current rules.  So just what is the FCC proposing, and what is the big issue here?

The rule governing the conduct of broadcaster’s contests, Section 73.1216, covers contests conducted by broadcasters over-the-air.  It does not cover contests by broadcasters that are exclusively conducted online (though, as we wrote here, if the contest is announced on the air, even if primarily conducted online, all the required on-air disclosures apply).  It does not cover contests conducted by third-parties that are broadcast on the air (so contests conducted by an advertiser are not covered by this rule).  The current rule, in addition to requiring that the contest be conducted fairly and in accordance with the rules adopted for the contest, requires that the “material rules” be broadcast on the air on a regular basis so that listeners know what they might win, how to play the contest, and how the winner is selected.  It is this requirement, that the material rules be broadcast on the station, that has led to problems in the past, and thus prompted the proposed changes advanced on Friday.As we wrote when we first got wind of this proposal, the contest rule has been the source of numerous fines on broadcasters.  In many cases, listeners have complained that broadcasters did not award the listener the prize that they thought they were due.  In following up on these complaints, the FCC often did not find any issues with the actual conduct of the contest, but still issued a fine to the station because the station had not properly informed its audience of the material rules of that contest in compliance with Section 73.1216.  The station did not broadcast the “material rules” often enough to inform the listening public (see, for instance, our articles herehere and here) .

While conducting seminars on FCC legal issues, I routinely highlight the FCC’s concerns about these issues, and I’m always asked just what constitute the “material terms” of a contest. In Friday’s Notice of Proposed Rulemaking, the FCC set out what it considers to be the material terms, stating:

[m]aterial terms include those factors which define the operation of the contest and which affect participation therein.   Although the material terms may vary widely depending on the exact nature of the contest, they will generally include: how to enter or participate; eligibility restrictions; entry deadline dates, whether prizes can be won; when prizes can be won; the extent, nature and value of prizes; basis for valuation of prizes; time and means of selection of winners; and/or tie-breaking procedures.

Entercom filed the petition seeking the change in the rules, arguing that the obligation to broadcast material rules on the air a reasonable number of times, in hopes that a station listener was likely to hear the announcement, made no sense in the modern era.  Instead, a station could simply refer listeners to a website where those rules would be posted.  With rules on the website, listeners would not have to try to decipher rules that a station might convey orally a couple of times a day on the station.  Instead, the listener could go to the website and read the rules and determine whether or not they wanted to participate in the contest (or whether or not the station conducted the contest in the way that it had promised).  The idea seems simple, but the FCC asked a number of implementation questions and made proposals that in some ways deviated from the simple proposal of Entercom.

The Commission has tentatively agreed that online posting of contest rules is a good idea, but it still has some questions.  The Commission would propose adopting the new rule as just an option – allowing broadcasters to continue to meet their obligations the old fashioned way – through on-air disclosures.  Some of the other issues raised in the Notice of Proposed Rulemaking include:

  • How can the broadcaster who posts the material rules on a website make sure that they can be found by listeners?  Must the rules be indexed in some way on the principal landing page of the station’s site (or the site of some other company or group on whose site they are posted)?
  • If the station does not have a website, can the station post the rules on the site of a state broadcast association or some other organization or company?
  • The Commission asks whether the broadcaster can post the entire set of rules for the contest on the disclosure site, or must it still produce a list of the “material rules” on the disclosure website, so as to not hide the important details of the contest in the “fine print” of the full set of rules.
  • The Commission also suggests that the material rules on the website not differ from the rules announced on the air (seemingly an obvious obligation, as if a broadcaster was saying one thing on the air and referring listeners to a site where something different was stated, there would be problems beyond those associated with the disclosure obligations)
  • In what might be the most burdensome of the proposals, the FCC suggests that the broadcaster fully disclose the whole web address of the disclosures every time the contest is mentioned on the air.  Clearly, that may be unnecessarily burdensome, as there may be times that the contest is simply mentioned in passing (“your listening to 99X, your $10,000 give-away station”), where mentioning the website just does not make sense.

All of these issues will be considered by the FCC before adopting any revisions of the current rules.  So, while the rule change is not yet a done deal, the FCC is moving in the right direction toward giving broadcasters reasonable options as to how to meet the disclosure obligations.  Comments will be due 60 days after the order is published in the Federal Register, and replies due 30 days later.