Broadcast and Cable Television: Requirements for Identifying Sponsored Programming Should Be Clarified
Published: 2013-01-31T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: 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.
section_title: What GAO Found
paragraphs: 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.
section_title: What GAO Recommends
paragraphs: 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.

section_title: Letter
paragraphs: As broadcasters facing budget constraints make greater use of  commercially sponsored content, such as commercial products as part of  entertainment programs, some members of Congress are concerned that  broadcasters are not properly disclosing sponsorship information to the  public. The Federal Communications Commission (FCC) holds television  and radio broadcasters to a basic principle, embodied in the  Communications Act of 1934, as amended, that the public is entitled to  know when and by whom it is being persuaded. Sponsorship  identification statutes and regulations, overseen by FCC, require licensed  broadcasters operating television and radio stations, as well as cable  operators that originate programming, to disclose on-the-air when a party  gives money or a payment in-kind for the broadcast of programming  content. In many cases, such as a standard 30 second product  commercial, the sponsor of the content is obvious. However, as  consumers make greater use of digital video recorders and other  technologies that allow viewers to bypass commercials, advertisers turn  to different approaches. For example, a news program may accept  money to broadcast a pre-recorded segment on an allergy medication, or  a sitcom or reality show may accept money to prominently feature a  brand of soft drink. In these situations, the product may be stated or  obvious, but the fact that the product sponsor paid to have it included in  the show may not be obvious. Similarly, FCC requires broadcasters to  identify the individual or group truly responsible for funding an  advertisement with political or controversial content. Thus, FCC’s  sponsorship identification requirements apply to both commercial and  political advertisements, but the requirements differ for each. In addition,  all political advertising for federal elections must meet rules enforced by  the Federal Election Commission (FEC). Similar to the changes  broadcasters face with commercial advertising practices, recent changes  in election campaign laws have had an impact on political advertising.
Although the FCC and FEC requirements serve different purposes— protecting the radio and television listening and viewing public, on the one  hand, and protecting the election process on the other—both direct  disclosure of television and radio advertising sponsorship. Given the  increase in use of sponsored content and changing rules associated with  political content, you asked us to review FCC enforcement of sponsorship  identification, federal election disclaimer requirements and other  information that must be reported to FEC, and current industry practices.  This report (1) describes the sponsorship identification requirements and  guidance for commercial and political content, the federal election  disclaimer requirements, as well as stakeholders’ views of these  requirements and guidance, and (2) assesses how and to what extent  FCC and FEC address sponsorship complaints through each agency’s  enforcement process.
To describe the sponsorship identification requirements and guidance  and obtain stakeholders views on these requirements and guidance, we  reviewed sponsorship identification and disclaimer statutes and  regulations enforced by FCC and FEC and interviewed officials from both  agencies responsible for administering their respective requirements. We  also reviewed relevant literature as far back as the Radio Act of 1927 and  interviewed agency officials to understand the history of the statutes and  regulations, their purposes, and how they differ for various media  platforms and for different types of advertising. We interviewed over a  dozen stakeholders that are subject to sponsorship identification  requirements, have monitored broadcasters’ compliance with sponsorship  identification requirements, or contributed research to the topic. These  stakeholders included television and radio network officials, consumer  representatives, academics, and trade associations to obtain their views  of the effect of statutes and regulations and possible changes to them.
To determine how and to what extent FCC and FEC address sponsorship  identification complaints, we interviewed FCC and FEC officials  responsible for receiving, processing, and investigating complaints and  analyzed relevant FCC and FEC documents describing agency methods  and processes for identifying violations of sponsorship identification  statutes and regulations, receiving sponsorship identification complaints,  communicating with the complainant and subject of the complaint,  initiating and conducting investigations, and taking enforcement action. In  addition, we analyzed relevant FCC and FEC databases to describe  sponsorship identification and disclaimer complaints, investigations, and  enforcement actions from 2000 through 2011. We also analyzed FCC and  FEC strategic plans and data describing the agencies’ respective goals  for sponsorship identification and disclaimer statement complaint  processing and enforcement and the agencies’ progress toward meeting  their goals.
We conducted this performance audit from March 2012 through January  2013 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives. See appendix I for a more  detailed explanation of our scope and methodology.
subsections: section_title: Background
paragraphs: Federal law has required broadcasters to identify sponsors of radio  program content since 1927.requirements have been amended to expand and further define the  requirements.
Since that time, sponsorship identification  In 1934, the Communications Act established FCC and gave it  authority to administer sponsorship identification requirements for  broadcasters, among other responsibilities, as well as creating  additional sponsorship identification requirements.  In 1944, FCC adopted rules implementing the sponsorship  identification requirements created in 1934. These rules, which  required a full and fair disclosure of the sponsor’s identity, remain  largely unchanged.  In 1960, the Communications Act was amended to redefine the  situations in which broadcasters must identify program sponsors. The  need for this change arose due largely to the payola scandals of the  late 1950s. The conference report accompanying the 1960 act  included 27 case examples that were included to provide guidance on  how the committee believed the sponsorship identification  requirements should be applied.  In 1963, FCC adopted regulations implementing the 1960  amendments and provided 36 sponsorship identification case  examples as guidance.  In 1969, FCC adopted regulations applying sponsorship identification  requirements modeled on the broadcast rules to cablecasting by  community antenna television systems (CATV). Cablecasting was  defined as “programming distributed on a CATV system which has  been originated by the CATV operator or by another entity, exclusive  of broadcast signals.”
In 1972, FCC updated its regulations to apply sponsorship  identification requirements to programming under the exclusive  control of cable television operators.  In 1975, FCC clarified the meaning of its 1944 requirement for full and  fair disclosure of the identity of the sponsor, modifying its regulations  to make clear that broadcasters and cablecasters are expected to  look beyond the immediate source of payment where they have  reason to know (or could have known through the exercise of  reasonable diligence) that the purchaser of the advertisement is  acting as an agent for another, and to identify the true sponsor.  In 1991, FCC adopted rules requiring visual and audible sponsorship  identification announcement for televised advertisements concerning  political issues.  In 1992, FCC amended the requirements for advertisements  concerning candidates by removing the requirement for an audible  announcement and adopting specific criteria for a visual  announcement. consist of letters at least 4 percent of the vertical picture height and  that the statement be shown for at least 4 seconds.
7 FCC Rcd. 678 (1992).   7 FCC Rcd. 1616 (1992) (rule is codified at 47 C.F.R. §1212(a)(2)(ii)).
There have been no changes to the sponsorship identification statutes or  regulations since 1992, although there have been more recent FCC  cases affecting their interpretation and application.
These sponsorship identification requirements generally apply to different  types of advertising. Table 1 shows the range of different types of content  that often require a sponsorship announcement, including commercial  advertising where the sponsor is not typically apparent and political or  controversial issue advertising where an announcement must meet  additional requirements.
Presently, the Communications Act, as implemented by FCC, requires  broadcasters and cablecasters to disclose to their listeners or viewers if  content has been aired in exchange for money, services, or other  inducement. For commercial content, such as advertisements, embedded  advertisements, and video news releases, the announcement must be  aired when the content is broadcast and can be either a visual or an  audible announcement. Political and controversial content must also have  either type of announcement when aired on television, but candidate  advertisements have specific visual requirements. In addition, when  anyone provides or promises to provide money, services, or other  inducement to include programming in a broadcast, that fact must be  disclosed to the broadcaster or cablecaster. Both the person providing or  promising to provide the money, services, or other benefits and the  recipient must make this disclosure so that the station can broadcast the  sponsorship identification announcement.
The general public and to a lesser extent other sources, such as media  public interest groups, file complaints with FCC about violations. Because  of the high number of broadcasters and cablecasters, FCC relies on the  public as an important source of information about compliance with   The public is able to assist in monitoring broadcasters’  requirements. compliance with requirements because, as we will describe later in our  finding on requirements, broadcasters are required to maintain a publicly  available inspection file. This publicly available file lists pertinent  information, such as quarterly issues and programs list, which describes  the programs that have provided the station’s most significant treatment  of community issues during the preceding 3 months. The public can  access the public inspection file to check and monitor broadcasters’  compliance and service.
As part of its enforcement process, FCC investigates complaints about  potential violations by broadcasters and cable operators of the statutes  and rules it administers, including sponsorship identification complaints.  Two bureaus within FCC—the Consumer and Governmental Affairs  Bureau (CGB) and the Enforcement Bureau—are primarily responsible  for developing and implementing procedures for processing complaints,  conducting investigations, and taking enforcement actions. As part of its  role of responding to consumer complaints and inquiries, CGB initially  processes the majority of the complaints FCC receives. To the extent that  a complaint is defective, for example, for failing to identify a particular  broadcast, including its date, time of day, and the station on which it was  aired, CGB will dismiss the complaint as incomplete and advise the  complainant accordingly, providing guidance as to what information  should be included in a complaint. CGB forwards most complaints  deemed complete to the Enforcement Bureau, but some complaints,  including political sponsorship identification complaints go to the Media  Bureau for further investigation. When FCC discovers violations it can  take various enforcement actions dependent on the seriousness of the  violation, such as admonishment, monetary forfeiture, or not renewing a  broadcaster’s license.
2 U.S.C. § 441d. the advertisements. The disclaimer requirements apply to any kind of  communications media carrying public political advertising and are not  limited to broadcast or cablecast advertisements.
Similar to FCC, FEC initiates most enforcement activity pursuant to  complaints received from the general public, including individuals and  organizations associated with federal political campaigns. Complaints are  filed with the Office of Complaints Examination and Legal Administration  (CELA), which reviews the complaint to determine if the complaint states  facts, identifies the parties involved, and provides or identifies supporting  documentation. If the complaints are deemed sufficient, CELA informs the  complainants that they will be notified once the case has been resolved. If  FEC discovers violations, enforcement can include negotiated corrective  action, including civil penalties, or other Commission initiated legal action  seeking judicially imposed civil penalties or other relief.
section_title: Sponsorship Identification Requirements Are Manageable, but FCC Guidance Could Be Clarified
paragraphs: As previously stated, sponsorship identification statutes and regulations  require broadcasters and cablecasters to identify commercial content— usually an advertisement, an embedded advertisement, or a video news  release (VNR) that has been broadcast in exchange for money or  payment in-kind. According to most broadcasters we spoke with,  commercial content is fairly straightforward to identify, and they are  accustomed to dealing with such content and report that compliance is  manageable. For content considered political or discussing a  controversial public issue, requirements, enforced by FCC and FEC, are  more extensive and require more detailed on-air announcements and  tracking of all related communications and agreements in a public file for  FCC.
subsections: section_title: FCC’s Sponsorship Identification Requirements for Commercial Content
paragraphs: According to FCC, commercial advertisements do not always require a  sponsorship announcement. FCC does not require an announcement  when an obvious connection exists between the content and sponsor,  such as with a standard commercial advertisement. For all commercial  advertisements where the true sponsor is not apparent, even for  infomercials that may be 30 minutes or longer, FCC requires a written or  verbal announcement to occur only once during the program. This  announcement must fully and fairly disclose the true identity of those who  are paying for the advertisement. In addition, whenever an individual,  such as a deejay, receives money or payment in-kind for airing specific  content or favorably discussing a specific product a sponsorship  announcement must be made. Therefore, station employees must  disclose such transactions to the station. Thus, if a record company or  its agent pays a deejay to play records or talk favorably about an artist or  record on the air, and he does so, the result is considered sponsored  content. FCC guidance directs that the deejay must reveal the payment to  the broadcaster and a sponsorship announcement must be made when  the content goes on-the-air. According to broadcasters, industry trade  groups, and others we spoke with, compliance with these standards and  requirements is not a problem because the requirements are part of their  standard review process.
Embedded advertisements—typically, when a commercial product is  provided without charge to use in entertainment programming—may not  require a sponsorship announcement if they are reasonably related to the  show. Since many consumers now record shows or change the channel  during commercials, broadcasters have increased their use of embedded  advertising. However, a sponsorship announcement is not required every  time a product appears in a program. For example, FCC’s guidance  describes scenarios in which a manufacturer provides a car to a television  show for a detective to chase and capture the villain, and states that the  use of the car alone would not require a sponsorship announcement. In  this scenario the use of the car could be considered “reasonably related”  to its use in the show. However, in the same scenario, if a character also  made a promotional statement about the specific brand—such as its  being fast—FCC requires a written or verbal sponsorship announcement  sometime during the program. According to FCC’s guidance, in this  second scenario, the specific mention of the brand may go beyond what  would be “reasonably related” to its use in the show. The reasonably  related standard requires some assessment of the content. Broadcasters  told us they have processes in place to review content on their networks  to determine if a program needs a sponsorship announcement for an  embedded advertisement.
VNRs are another type of commercial content which may require a  sponsorship announcement. VNRs are pre-packaged news stories that  may include only film footage or may also include suggested scripts.  However, broadcasters do not always use a VNR in its entirety but may  use portions of the video. For example, if a news story about car  manufacturing could benefit by showing video from inside a  manufacturing plant, a broadcaster may use footage from a VNR because  it cannot easily access the interior of a plant during its operations.
According to FCC, it requires broadcasters to air a sponsorship  announcement when using VNRs, even when they are provided free of  charge, under the same circumstances as it would require a sponsorship  identification for other programming. When a film or a story was provided  by a third party and it conveys value to the station, it must have either a  verbal or written sponsorship announcement, if it is furnished in  consideration for identification of a product or brand name beyond what is  reasonable related to the broadcast.FCC issued in its 2005 Public Notice concerning the use of VNRs. In that  Public Notice, FCC reminded broadcasters of their obligation to comply  with sponsorship identification requirements when using VNRs and that  there must be an announcement to the audience about the source and   This is an update to the guidance  sponsorship of the VNR.with FCC’s position and believe it should treat VNRs similar to press  releases and not require a sponsorship announcement if a broadcaster  did not pay for the material and uses only a portion of its content. For  example, in the previous illustration, a broadcaster may use VNR footage,  because it does not have access to the interior of a car manufacturing  plant. In such instances, FCC requires broadcasters to make an  announcement that could appear on the screen during the footage  stating, “Footage furnished by ABC Motor Company” or as a verbal or  written announcement at the end of the program. Broadcasters we spoke  with had differing opinions on whether to use VNRs. While one  broadcaster believes it should be up to the news program to determine if  an announcement is needed, others we spoke with were divided about  whether to use VNRs with a sponsorship announcement or to never use  VNRs at all. Some broadcasters and others reported the use of VNRs has  been increasing, in part, because of tighter news budgets and the need to  fill airtime. In recent years, instances of VNR use without proper credit  have been reported and investigated by FCC; we will discuss these  instances later in our report.
Nevertheless, some broadcasters disagree  Most broadcasters we spoke with indicated the sponsorship identification  requirements are generally manageable as part of their review processes.  As previously indicated, broadcasters told us they have processes in  place to review the different types of advertisements and other  programming aired. These reviews check to ensure the advertisement or  programming meets FCC requirements, including the sponsorship  identification requirements. Since it is part of the standard content review  process and the sponsorship identification requirements have not  changed for many years, broadcasters told us the requirements were not  difficult to meet.
section_title: FCC Sponsorship Identification Requirements for Political and Controversial Content
paragraphs: Political content and content discussing a controversial issue of public  importance are subject to all requirements that commercial content must  follow but have additional on-air and public file sponsorship identification  requirements. Advertisements that contain political content or involve  public discussion of a controversial issue must include a sponsorship  announcement at the beginning or end of the program. If the program is  longer than 5 minutes, the announcement must be made at both the  beginning and end of the program. For broadcast television and political  content discussing a candidate, a visual announcement must be made  that is at least equal to 4 percent of the screen height must exist and lasts  4 seconds. For broadcast radio, there must be an audible  announcement.
47 C.F.R. §§ 73.1212(e) (for broadcast material), 76.1701(e) (for cablecast material). post a majority of their public file on this website by February 2013,  making the file more easily accessible to the general public.
section_title: FEC Disclaimer Requirements
paragraphs: According to FEC, paid political communications supporting or opposing  candidates for election to federal office, which include radio and television  advertisements, are required to contain what are called “disclaimer  statements.”statutes and regulations. Television and radio political advertisements  authorized and paid for by a federal candidate or his or her campaign  committee or another organization must include a disclaimer spoken by  the candidate identifying him or herself and stating that he or she  approved the advertisement, as well as a statement identifying the  organization that paid for the advertisement. Television advertisements  must either show the candidate making the disclaimer statement or show  a clearly identifiable image of the candidate during the statement. They  must also include a clearly readable written statement similar to the  verbal statement that appears at the end of the advertisement for at least  4 seconds. Certain advertisements not approved by a candidate or his or  her committee must identify who paid for the advertisement, state that it  was not authorized by any candidate or candidate’s committee, and list  the permanent street address, telephone number, or World Wide Web  address of the person who paid for the communication.
section_title: Reporting Political Advertising Financing
paragraphs: In addition to monitoring compliance with these disclaimer requirements,  FEC serves as a repository for campaign finance data for candidates for  political office. Just as stations licensed by FCC are required to  preserve records to establish that they are meeting their responsibility,  among others, to treat political candidates running for the same public  office equally, FEC oversees requirements to report campaign funding  and expenditures. Individuals, political committees, and other  organizations supporting or opposing candidates for federal office are  required to report campaign funding and expenditures for certain  activities, which can include payments made for purchasing political  advertising and information on the funds they receive for  advertisements. This reporting is done to assure that money is being  collected and spent in accordance with federal election campaign law.  The reporting requirements vary according to the purpose of the  advertisement, who paid for the advertisement, and whether it is the  product of a coordinated effort between political committees and others.
The political committees are always subject to the reporting requirements  and must submit itemized reports to FEC showing all of their  expenditures, including advertising. Political committees must also submit  itemized reports to FEC showing contributions received, including  contribution amounts, dates, and contributor names and addresses. FEC  has also required organizations and individuals to report expenditures for  political advertisements and donations of $1,000 or more made for certain  political advertisements, called “electioneering communications,” which  are related to elections for federal office and broadcasts within specified  time frames before the elections.
As described in FEC’s guidance, FEC administers specific reporting  requirements for those making electioneering communications, which can  include political advertisements on television or radio. Specifically,  electioneering communications refers to any broadcast, cable, or satellite  communication that refers to a candidate for federal office and is  distributed within specific time frames before a federal general election or   Political advertisements that do not meet these  federal primary election. specifications are not subject to these reporting requirements. Once  payments for electioneering communications, including television or radio  advertisements, exceeds $10,000 in any calendar year, those responsible  for them must report payments and the sources of funds used to FEC  within 24 hours of each broadcast.things, identify:   Each report must, among other  the person or organization that made the payments, including their  principal place of business; any person sharing or exercising direction or control over the activities  of the person who made the payments;  the amount of each payment in excess of $200, the payment dates,  and the payee; all candidates referred to in the advertisements and the elections in  which they are candidates; and  the name and address of each person who donated $1,000 or more  since the first day of the preceding calendar year to those responsible  for the advertisement.
According to FEC, “coordinated communications” are contributions for  communications that are coordinated with a candidate or party  committee. These contributions are subject to amount limitations, source  prohibitions, and reporting requirements under the Federal Election  Campaign Act. coordinated, also known as independent expenditures, have  requirements to report itemized payments for the advertisements that are  triggered if they expressly advocate the election or defeat of a clearly  identified candidate. While independent expenditures are not subject to  spending limitations, they are subject to the reporting requirements.  Those responsible for the payments must report:   Expenditures for communications that are not a statement indicating whether each payment was in support of, or in  their names, mailing addresses, occupations, and employers;  the name and mailing address of the person to whom payments were  made;  the amount, date, and purpose of each payment;  opposition to, a candidate, together with the candidate’s name and  office sought;   the identification of each person who made a contribution in excess of  $200 for the purpose of making a coordinated advertisement; and a verified certification as to whether such expenditure was made in  cooperation, consultation, or concert with, or at the request or  suggestion of a candidate, a candidate’s authorized committee, or its  agents, or a political party committee or its agents.
Corporations, labor unions, individuals and businesses with federal government  contracts, foreign citizens, and qualified non-profit corporations are prohibited from  coordinating these advertisements.
section_title: FCC Guidance for Commercial, Political, and Controversial Content
paragraphs: FCC provides guidance on meeting sponsorship identification  requirements, which broadcasters we spoke with generally report to be  helpful. Broadcasters we spoke with told us they apply the sponsorship  identification requirements many times a day during reviews of programs  and when preparing news programs. This process involves network  employees viewing all content, and if a program appears to focus too  much on a product, then the broadcaster will ask the producer of the  content for a sponsorship announcement. Broadcasters we spoke with  indicated they tend to be cautious in reviewing and identifying sponsored  content in order to avoid enforcement actions.
The guidance issued in FCC’s 1963 report and order has remained  substantially unchanged, and while many broadcasters indicate the  guidance is still useful, it addresses issues with older technology that may  no longer be relevant and does not discuss how the rules apply to newer  technologies. Specifically, one case example discusses a broadcaster’s  use of a kinescope recording of a congressional hearing provided by a  third party. The guidance states that “expensive kinescope prints  dealing with controversial issues are being paid for by someone,” and  therefore the broadcaster should determine who and make a sponsorship  announcement. While this case example provides guidance for the use of  content discussing a controversial issue, which clearly falls under the  sponsorship identification requirements, the cost of creating such content  is less of an issue today. We have previously reported on the benefits of  revisiting provisions of regulatory programs to determine if changes might  be needed to better achieve the program’s goals. Current technologies,  such as digital video equipment and the Internet, allow similar content to  be created and distributed and it is often publicly available at no cost and  the rules are not clear how the rules apply in these situations. FCC  officials told us the agency has not updated the guidance because there  has been no need to update it. Rather, FCC officials said they have relied  on case law and public notices, among other devices, to provide guidance  to broadcasters and cablecasters.
However, some broadcasters indicated that FCC could clarify how the  guidance applies in specific situations, such as when a VNR or product is  used but the broadcaster was not paid. In its Public Notice issued in  2005, FCC reminded broadcasters and cablecasters of their sponsorship  identification obligations and indicated that VNRs generally need a  sponsorship announcement.  According to FCC’s enforcement reports,  its enforcement actions against broadcasters’ and cablecasters’ use of  VNRs have involved cases where the footage and script of a VNR  focused too much on a specific brand or product, beyond what was  reasonably related to the story. FCC told us these cases indicate that  VNRs should be following the same rules regarding sponsorship  identification as other programming. However, some stakeholders argue  VNRs are similar to press releases because they are often provided for  with no money or payment in-kind including no understanding or  agreement that they will be broadcast on-the-air. According to FCC  guidance, a press release does not need a sponsorship announcement.  Some broadcasters indicated they remain unsure of when there needs to  be a sponsorship announcement as part of a VNR. As a result, FCC’s  interpretation and the broadcasters’ interpretation of how the  requirements apply to VNRs remain vastly different, in-part because no  payment is made to the broadcaster to air the VNR. The Public Notice in  2005 sought comment on a number of issues related to the use of VNRs  and also indicated FCC intends to issue a report or initiate a formal  proceeding based on the comments received. As of the issuance of this  report, however, FCC has taken no further action in response to the  comments received.
section_title: FCC and FEC Follow Standard Procedures When Addressing All Complaints, but FCC Does Not Update Broadcasters Named in the Complaint
subsections: section_title: FCC Investigation and Enforcement Process
paragraphs: FCC’s investigation and enforcement process generally begins with a  complaint to the agency that will be reviewed by the CGB and may be  forwarded to the Enforcement Bureau if the complaint is complete. As  previously indicated, FCC receives complaints primarily through the CGB.  Since 2003, FCC has received over 200,000 complaints of all types  annually through CGB, some of which it dismisses as incomplete. Others,  including sponsorship identification complaints deemed to be complete  are forwarded to the Enforcement Bureau for possible investigation and  enforcement. Complaints involving non-political sponsorship identification  issues are forwarded to the Enforcement Bureau; but complaints raising  political sponsorship identification issues go to the Media Bureau.
When the Enforcement Bureau receives a complaint, the bureau  conducts several reviews prior to being classified as a sponsorship  identification complaint and prior to contacting the broadcaster named in  the complaint, as shown in figure 1. First, if a complaint is related to an  alleged sponsorship identification violation, the complaint goes to the  Investigations and Hearings Division where a manager conducts a review  of the complaint. If the manager determines the subject of the complaint  to be sponsorship identification related or related to another topic handled  by the Investigations and Hearings Division, then the complaint is  assigned to an attorney. The attorney enters it into the database at which  time it is considered a case and can be classified as related to  sponsorship identification. A case may be linked to numerous complaints,  or a case may be opened even though FCC received no complaints. For  example, in 2007, FCC received over 18,000 complaints and opened 3  sponsorship identification cases in response to a single incident wherein  a nationally syndicated radio and television host discussed the “No Child  Left Behind” program and did not disclose that the discussion was  sponsored.
As shown in table 2, according to FCC, it opened 369 sponsorship  identification cases from the beginning of 2000 through 2011,  representing just over 1 percent of the total cases the Investigation and  Hearings Division opened during that time period. According to FCC  officials, after opening a case, the attorney conducts a more substantive  review to determine if the allegations in the complaint, if true, would  constitute a possible violation of any statutes or regulations. If warranted,  the attorney may contact the complainant for more information. If it is  determined that no violation occurred or can be supported, the case may  be closed following the substantive review, by making a note in the case  file. If this substantive review determines a violation may have occurred,  then FCC will send a letter of inquiry to the broadcaster named in the  complaint initiating an in-depth investigation. As shown in table 2, 101  cases were closed following a substantive review and prior to a letter of  inquiry being sent.
If a case proceeds to a letter of inquiry being sent, the letter serves as a  notification to the broadcaster named in the complaint that it is under  investigation. The letter of inquiry requests specific information  concerning the complaint, such as a video of the broadcast. As shown in  table 2, from 2000 to 2011, FCC sent 242 letters of inquiry for  sponsorship identification cases. Next, FCC reviews the information  provided by the broadcaster named in the complaint in response to the  letter of inquiry. If FCC determines that a violation of the sponsorship  identification requirements did not occur or cannot be proven, it can close  the case. As with the process of closing a case prior to sending a letter of  inquiry, FCC closes the case by making a note in the case file but  typically does not inform the broadcaster named in the complaint. From  2000 through 2011, FCC reported it closed 195 cases with no  enforcement action following a letter of inquiry.
In other cases, following the letter of inquiry, FCC may determine that a  violation occurred and seek an enforcement action. Since 2000, FCC has  issued enforcement actions in 22 sponsorship identification cases with  varying types of violations and enforcement actions. For example, in 2011  FCC issued a notice of apparent liability to KMSP-TV in Minnesota, for  airing a VNR without identifying the sponsor of the release. KMSP-TV  was fined $4,000. In 2007, FCC issued a notice of apparent liability to  Sonshine Family television for airing five different episodes of programs  on ten separate occasions, during which an individual discussed the  federal “No Child Left Behind” program. Sonshine was fined $40,000  because the station failed to identify the sponsor of the content. Since  2000, FCC has also agreed to 10 consent decrees with different  broadcasters that include the broadcaster’s adopting a plan for  compliance and making a voluntary contribution to the United States  Treasury. The voluntary payments to the Treasury have varied in  amounts, from as little as $12,000 for a pay-for-play incident to as much  as $4 million a separate but similar incident.
While most complaints do not end with an enforcement action, FCC  generally does not communicate with the broadcaster named in the  complaint when it closes sponsorship identification investigations. As  previously indicated, the letter of inquiry notifies the broadcaster named in  the complaint that an investigation is under way but following that  communication FCC does not provide any information on the  investigation unless the case results in an enforcement action. GAO has  previously reported that FCC enforcement actions can help correct  identified compliance problems and deter future noncompliance.Similarly, informing a broadcaster under investigation that a matter has  been closed could help inform broadcasters about compliant activities.  Furthermore, while not specifically related to sponsorship identification  issues, in an effort to promote open government and public participation,  the administration has developed a plan to increase openness in the  government. The plan includes an initiative to enhance enforcement of  regulations through further disclosure of compliance information. This  builds on previous guidance to use increased disclosure to provide  relevant information to help make decisions. It further directs agencies to  develop plans for providing greater transparency about their enforcement  activities and for making such information available online. However,  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. They reported the lack of  information about cases and FCC decisions creates uncertainty about the  propriety of their past actions. In addition, this practice of not informing  broadcasters about the results of investigations does not align with the  administration’s goals to disclose compliance information to help  regulated entities make decisions. As a result, broadcasters might not  have sufficient information to determine whether they should modify their  practices. This could result in stations unnecessarily editing content  because of unwritten regulatory policy or what they assume the policy to  be.
According to FCC officials, they do not communicate with the broadcaster  named in the complaint because, among other reasons, FCC has no legal  obligation to do so. In addition, FCC officials identified several other  factors as to why it does not communicate with the broadcaster named in  the complaint. First, FCC officials told us it does not want to inform the  broadcaster named in the complaint a case was closed because it may  want to reopen the case if new evidence presents itself. Second, officials  also said that FCC does not want closing a case to be inaccurately  interpreted as an endorsement of the action being investigated even if the  investigation does not result in a finding of a violation. Finally, officials  indicated informing the broadcaster named in the complaint about closure  of an investigation would require crafting a letter tailored to fit the unique  set of facts and requirements for each case. This would be resource  intensive, and according to FCC officials, FCC does not have sufficient  resources to implement such practices.
FCC sponsorship identification investigations can be lengthy, according to  FCC data, taking from 10 months to over 5 years to complete. As shown  in table 3, the shortest time period for resolution of a case with an  enforcement action, was 10 months. The process to negotiate a consent  decree takes longer because it often involves complex negotiations  between FCC and a broadcaster. Even when the investigation sends a  letter of inquiry and results in no enforcement action, according to FCC  officials, 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.
As previously stated, paid political advertisements require disclaimer  statements and FEC’s enforcement process begins typically with a  complaint to CELA. FEC receives most disclaimer complaints from the  public. As shown in figure 2, complaints proceed through several  procedural steps, including a review and vote by the FEC commissioners.  CELA reviews the complaint for compliance with required criteria,  including ensuring it identifies the parties involved, involves a violation of  campaign finance law, and provides supporting documentation. If a  complaint does not meet these criteria, CELA notifies the complainant of  the deficiencies and informs them that no action can be taken pursuant to  the complaint unless those deficiencies are resolved. If the complaint  meets the criteria, CELA informs the complainant that they will be notified  when the matter has been resolved. From 2000 through May 15, 2012,  FEC opened 301 cases based on complaints alleging violations of  disclaimer statement requirements. The cases were based on complaints  alleging violations of the disclaimer requirements for advertisements  using various media, including television and radio, letters, and billboards.  For example, in 2006, a complaint alleged a television advertisement for a  congressional candidate in Ohio failed to include an oral statement that  identifies the candidate and states that the candidate has approved the  communication. Less than 17 percent of the complaints alleging violations  of disclaimer statement requirements involved television or radio  disclaimer requirements.
Prior to taking any action other than dismissing a complaint, FEC  provides the entity named in the complaint at least 15 days to respond  and demonstrate that no violation occurred. After the response period,  FEC’s Office of General Counsel evaluates the complaint and response  and may refer the case to the Alternative Dispute Resolution Office. This  office provides solutions for settling cases in lieu of litigation and allows  FEC to settle the case early in the enforcement process. While alternative  dispute resolution avoids the litigation process, the entity named in the  complaint must commit to terms for participation in an alternative dispute  resolution, which include setting aside the statute of limitations and  participating in negotiations to settle the case, among other conditions.  Alternative dispute resolution settlements generally require entities  named in the complaints to take corrective action, such as hiring  compliance specialists, designating persons as responsible for disclosure,  and attending educational conferences. Generally, FEC does not refer  cases for alternative dispute resolution that are highly complex but does  refer cases that could include incidents where FEC believes there was  knowing and willful intent to commit violations or potential violations in  areas that FEC has set as priorities.
For cases not recommended for alternative dispute resolution, FEC  Commissioners vote before an investigation is initiated. The Federal  Election Campaign Act requires that FEC find reason to believe that a  person has committed, or is about to commit, a violation as a precondition  to opening an investigation into an alleged violation. Should the  Commissioners’ vote to find reason to believe a violation occurred, FEC  and the alleged violator can negotiate a conciliation agreement that can  include a monetary penalty or corrective action. If the Commission needs  additional information prior to settling a case using a conciliation  agreement, the Enforcement Division conducts an investigation.  Violations not resolved with a conciliation agreement can result in the  Commission filing suit against the respondents.
Our review of FEC data found the disclaimer cases resulted in 330 case  outcomes that range from dismissals to civil penalties through conciliation  agreements. However, as shown in table 4, of the 38 outcomes that  could have ended with a civil penalty—conciliation agreement, alternative  dispute resolution agreement, and lawsuit—FEC assessed civil penalties  in only 29 cases, 7 of which were related to television or radio  disclaimers.
Unlike FCC, FEC provides status updates to those involved in  investigations and issues reports explaining investigation findings. On  December 31, 2009, FEC issued guidelines for tracking and reporting the  status and time frames of complaint responses, investigations, and  enforcement actions. The guidelines require the FEC’s Office of General  Counsel and the Office of Alternative Dispute Resolution to provide the  Commissioners and affected parties with a status report once per year for  cases in which the Commissioners have not yet voted on the  recommendation made by the General Counsel or the Office of  Alternative Dispute Resolution based on their initial reviews. These status  reports include estimate of when the Commissioners will vote.
Also unlike FCC, FEC issues reports explaining its resolution of  enforcement cases, including case dismissals. These reports can clarify  acceptable and unacceptable practices for the regulated community. For  example, during 2007, FEC received a complaint alleging that a  candidate had violated television advertisement disclaimer requirements  by including an improper disclaimer in the advertisement. The complaint  alleged that the printed disclaimer violated the requirements because it  did not also state that the candidate approved the advertisement. FEC  dismissed the case in an exercise of its prosecutorial discretion to not  pursue a violation in part because of partial compliance with disclaimer  requirements. In doing so, FEC observed that the verbal disclaimer  identified the candidate and informed the public of the candidate’s  approval of the advertisement and the printed disclaimer informed the  public that the candidate’s committee paid for the advertisement.
section_title: Conclusions
paragraphs: FCC receives hundreds of thousands of complaints related to all areas it  regulates but there have only been a small number of sponsorship  identification cases. Of the sponsorship identification cases opened by  FCC, only a handful have resulted in enforcement actions against  broadcasters, and many of those enforcement actions were for fines of  less than $100,000. Most broadcasters told us they generally have no  problems meeting the sponsorship identification requirements because  they have processes in place to review all content and ensure it has a  sponsorship announcement if needed.
However, FCC guidance for the sponsorship identification requirements  has not been updated in nearly 50 years to address more modern  technologies and applications. We have previously reported that  retrospective reviews of regulations can change behavior of regulated  entities. Similarly, a review and update of FCC guidance that discusses  outdated technologies could result in changes in behavior. One example  discusses a broadcaster’s use of expensive kinescope prints as part of a  story on a controversial issue. The example directs such a use should  receive a sponsorship announcement because of the controversial issue  being discussed and the cost of the film. Yet, today, because the expense  of providing film is no longer relevant, broadcasters may be unsure on  whether the concern is the expense of the film or the controversial issues  discussed in the film. FCC should clarify its guidance to clearly address  how, when content is provided with no money or payment in-kind and it  does not discuss a controversial issue, the situation should be treated.  Furthermore, FCC should clarify its examples to direct broadcasters’  treatment of content provided with no money or payment in-kind that does  not highlight a product or brand beyond the “reasonably related” standard,  such as a VNR. FCC has indicated VNRs must have a sponsorship  announcement; however, FCC’s enforcement of VNRs has not found fault  with the use of the VNR but rather when the VNRs focus on a specific  product. Stakeholders disagree on the use of VNRs. FCC’s enforcement  actions and guidance do not distinguish how to act when portions of  VNRs are used or when a VNR does not disproportionately focus on a  product or brand. FCC indicated in 2005 that it would issue a report or  take other necessary action regarding this issue and updating the  guidance could serve this purpose.
Unlike FEC in its enforcement of disclaimer requirements, FCC’s  enforcement process for sponsorship identification cases generally does  not inform the broadcasters or cablecasters named in the complaint when  investigations have been closed. In cases where a letter of inquiry has  been sent, the broadcaster or cablecaster must fulfill its responsibility and  provide FCC with the requested information. Yet, according to FCC,  because they have no legal obligation to inform broadcasters that an  investigation has concluded, it typically does not provide that information.  By providing this information, for cases in which FCC conducts a full  investigation and determines the broadcaster’s actions not to be a  violation of requirements, the outcome could provide guidance to the  broadcaster of allowable activities. Even in cases where FCC closed a  case with no investigation, informing the broadcaster that the case is  closed, even if it may be reopened in the future, would support  government-wide goals of greater transparency and sound oversight  practices.
Finally, while in 2011 FCC had specific goals related to the timeliness of  completing sponsorship identification investigations, it was unable to  provide data supporting how it met those goals, and in subsequent years  it withdrew the goals. 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.
section_title: Recommendations
paragraphs: We recommend that the Chairman of the FCC take the following three  actions:
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, FCC should initiate a process to update its  sponsorship identification guidance and consider providing additional  examples relevant to more modern practices.
To improve its transparency concerning which investigations are  ongoing or have been concluded and to provide guidance on  allowable activities, 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.
To improve timeliness of investigations and ensure, when possible,  that investigations are completed in an expeditious manner, 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.
section_title: Agency Comments and Evaluation
paragraphs: We provided a draft of our report to FCC and FEC for review and  comment. FCC provided comments in a letter dated January 23, 2013,  that is reprinted in appendix II. Overall, FCC indicated that it will consider  our recommendations and how to address the concerns discussed in our  report.
In response to our second recommendation—to communicate the closure  of investigations with the broadcaster named in the complaint when a  letter of inquiry has been sent—FCC identified a number of issues, many  of which were cited in our report. Specifically, FCC has concerns that  reporting the closing of a case may be misinterpreted as an endorsement  of a broadcaster’s actions. FCC further noted its limited number of  Enforcement Bureau staff available to work on the large portfolio of cases  could and that it could not dedicate the necessary time to craft closing  letters tailored to each case. However, we feel that FCC could create a  standard letter—stating that a case has been closed, that the closing of  the case does not endorse the actions of the broadcaster named in the  complaint, and that the case could be reopened because of new  evidence.  We believe such a standard letter would require minimal  resources to create and send, yet would contribute to greater  transparency. FCC also noted that it is reluctant to single out sponsorship  identification matters for special treatment in terms of closure letters but  are also concerned about the even greater impact on resources if closure  letters are instituted on a broad basis.  However, we believe that this  could serve as a pilot program for greater adoption of closure letters for  other types of FCC investigations. In response to FCC’s concerns, we  updated our recommendation to demonstrate how a closure letter could  be worded to indicate the closure did not indicate an endorsement of the  actions being investigated and that a case could be reopened.
Both FCC and FEC provided technical comments that were incorporated  as appropriate. When providing its technical comments, FCC discussed  the treatment of VNRs indicating that although the 2005 Public Notice  states VNRs generally must have a sponsorship announcement, recent  cases involving VNR complaints have resulted in FCC treating VNRs  similar to other programming subject to the sponsorship identification  requirements. We reflected this change in the report, and added a  reference to FCC decisions about VNRs to our first recommendation.
As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution of it until 30 days from  the date of his letter. At that time, we will send copies of this report to the  Chairman of the Federal Communications Commission, and the Chair of  the Federal Election Commission. We will also make copies available to  other on request. In addition, the report will be available on the GAO Web  site at http://www.gao.gov.
If you or your staff have any question, please contact me at (202) 512- 2834 or goldsteinm@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff that made major contributions to this report are  listed in appendix III.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: We were asked to review requirements for identifying the sponsors of  broadcast commercial and political advertisements and to determine the  extent to which agencies responsible for administering them address  complaints alleging violations of the requirements. Specifically, we (1)  describe the sponsorship identification requirements and guidance for  commercial and political content, the federal election disclaimer  requirements, as well as stakeholders’ views of these requirements and  guidance and (2) assess how and to what extent FCC and FEC address  sponsorship complaints through each agency’s enforcement process.
To describe the sponsorship identification requirements and guidance as  well as stakeholders views on these requirements and guidance, we  reviewed sponsorship identification statutes and regulations, including the  Communication Act of 1934, as amended, and the Federal Election  Campaign Act. We also reviewed relevant academic literature and  interviewed FCC and FEC officials to gather their understanding of the  governing statutes and regulations, how they have changed, their  purposes, and how they apply to various media platforms, including  conventional and embedded advertising and video news releases, and  political and controversial advertisements. We conducted interviews with  over one-dozen stakeholders selected because they are either subject to  sponsorship identification requirements, have monitored broadcasters’  compliance with sponsorship identification requirements, or contributed  research to the topic. These stakeholders’ interviews were conducted with  representatives from the four major television broadcast networks as well  as two additional groups that own television and radio stations. We also  interviewed representatives from a consumer watchdog organization,  academics, and trade associations that represent broadcasters and news  directors and producers. These interviews were conducted to obtain  views on the effect of statutes and regulations and possible changes to  them.
To determine how and to what extent FCC and FEC address sponsorship  identification complaints, we interviewed FCC and FEC officials  responsible for receiving, processing, and investigating complaints. In  addition, we analyzed relevant FCC and FEC documents describing  agency methods and processes for identifying violations, receiving  sponsorship identification complaints, communicating with the  complainant and subject of the complaint, initiating and conducting  investigations, and taking enforcement actions. We also analyzed  relevant FCC and FEC data to describe sponsorship identification  complaints, investigations, and enforcement actions. We analyzed FCC  data showing all complaints received by FCC from 2000 through June  2012 to determine the percentage of complaints that were sponsorship  identification complaints, FCC actions in response to sponsorship  identification complaints, and the time frames for resolving these  complaints. We determined the FCC data to be sufficiently reliable for our  purposes based on previous analysis of the FCC database and based on  current interviews. To determine the extent to which FCC addresses  sponsorship identification complaints, we analyzed all FCC enforcement  actions pursuant to these complaints from 2000 through June 2012. We  also analyzed FEC data showing all complaints received by FEC from  2000 through May 15, 2012, to determine the percentage of complaints  that were disclaimer statement complaints, FEC actions in response to  disclaimer statement complaints, and the time frames for resolving these  complaints. The FEC data were not materially relevant to our findings and  so while we asked a series of questions about the internal controls and  data reliability, we did not make a final determination of its reliability. To  determine the extent to which FEC addresses disclaimer statement  complaints, we analyzed all FEC disclaimer statement cases, including  cases dismissed by FEC, and all FEC disclaimer statement enforcement  actions from 2000 through May 15, 2012. We also analyzed FCC and  FEC strategic plans describing the agencies’ respective goals for  sponsorship identification and disclaimer statement complaint processing  and enforcement. In addition, we analyzed FCC and FEC data and  documents describing whether the agencies met their respective goals.  We interviewed FCC and FEC officials about their goals and their  progress toward achieving them.
We conducted this performance audit from March 2012 through January  2013 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives.
section_title: Appendix II: Comments from the Federal Communications Commission
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, Ray Sendejas, Assistant  Director; Eric Hudson; Bert Japikse; Michael Mgebroff; Amy Rosewarne;  and Andrew Stavisky made key contributions to this report.