The FCC has entered into Consent Decrees with four major radio broadcasters — Clear Channel, Citadel, CBS Radio, and Entercom — in which the broadcasters agreed to make voluntary contributions totaling $12.5 million to terminate the agency's investigations into potential violations of the sponsorship identification rules for payola. Though these broadcasters made no admissions of guilt for payola violations, they agreed to implement business reforms and compliance plans to curb payola practices.
The Consent Decrees reiterate the Commission's general prohibition against payola and specify permissible activities in which broadcasters and record companies may engage without running afoul of the sponsorship identification laws. For example, subject to some restrictions, broadcasters may solicit, receive, and accept items of value for contests and other giveaways, so long as contest rules and announcements disclose the sponsor of any prizes. If appropriate disclosures are made, broadcasters may receive payments for on-air advertising, arrange for artist appearances subsidized reasonably by record labels, and enter into other commercial transactions with record companies for music distribution or promotion. Also, the Consent Decrees enumerate categories of "nominal consideration," such as CDs, concert tickets, meals and entertainment, and modest personal gifts, that broadcasters may solicit, receive, and accept from record companies under limited circumstances.
The broadcasters agreed to maintain certain documentation, including a database identifying all items of value provided by record companies. Other key compliance measures they agreed to adopt include: regular training for programming personnel on payola rules, appointment of a company-wide compliance officer and market-level compliance contacts, an employee hotline, and disciplinary procedures for any employee accused of violating the sponsorship identification rules.
Although the Consent Decrees apply specifically only to the four companies involved, all broadcasters should look to these for guidance on the FCC's stance regarding payola and sponsorship identification rules. In statements accompanying the Consent Decrees, Chairman Martin indicated that the "Commission has provided clear guidance to licensees" through this settlement, which Commissioner Adelstein characterized as "a template for addressing other pending allegations and payola violations in the future."