FCC Proposes $8000 Fine for Failure to Award $396 Prize Within Time Period Set Out in the Contest Rules

Last week, the FCC’s Enforcement Bureau issued a Notice of Apparent Liability proposing an $8000 fine on a Los Angeles radio broadcaster that did not award a contest prize until over a year after the contest rules called for the prize to be delivered.  The contest rules called for the prize to be awarded within 30 days of a winner sending all required paperwork to the station.  As payments were made over a year after the end of the 30-day period provided by the contest rules, the Bureau concluded that the station had violated Section 73.1216 of the FCC rules which requires, among other contest rules, that a contest be conducted “fairly and substantially as represented to the public.”  The Bureau’s Notice cites to FCC precedent indicating that “timely fulfillment of the prize” is a material term in the contest rules which, when violated, represents a violation of the FCC rule.

The prize money that was awarded late was only $396, so some might think that a proposed fine of $8000 is excessive, though the Bureau indicates in a footnote that there were 98 prize winners in the same contest that did not timely receive their prizes.  The Bureau itself noted that the “base forfeiture” for a violation of the contest rules set out in the FCC’s schedule of fines is $4000.  But the proposed fine was adjusted upward in this case because the FCC perceived that, for a large company such as the licensee of this station, a $4000 fine might simply be seen as a cost of doing business, and not act as a sufficient deterrent against future bad conduct.  The FCC even noted that it had the power to fine the station for each day that the contest award was not made, which could have resulted in a fine of hundreds of thousands of dollars.

The licensee tried to excuse its conduct, blaming factors including the COVID lockdowns and a ransomware attack that disabled the station’s systems.  The FCC staff did not credit these justifications, as the prize should have been awarded by March 2, 2020, before the COVID lockdowns began and before the October 2020 ransomware attack.  So, while these events may have slowed the processing of the payment, as they occurred after the date by which the rules required that the payment should have been made under the terms of the contest rules, the FCC did not see them as an excuse for not awarding the prize as set out in those rules.

The Notice illustrates the importance of broadcasters being very careful about the way that they conduct their on-air contests.  We’ve noted on this Blog many instances where the FCC has fined broadcasters for not conducting a contest according to the rules that they set out.  Timeliness of the award of the prize has indeed led to fines in prior cases (see this article).  We also noted cases where ambiguous rules were construed against the station (here and here).  This includes a case where the rules were accurately given in on-the-air announcements, but not in the written online version.  In a recent case, the failure to keep the rules posted on the station’s website for a full 30 days after the contest ended was also a violation (see our articles here and here on the FCC’s decision to allow stations to post full contest rules stating all material terms on their websites instead of reciting them on the air, as was once required).  Misstating the prize or its value can also lead to fines (see, for example, the cases we noted here and here).  And, of course, not awarding a prize to someone who seemingly qualified to receive it can also lead to problems (see cases noted here and here).

Most FCC decisions in contest cases are complaint-driven.  And the failure to timely award a prize that someone is expecting is one way to vastly increase a station’s chance of being hit with an FCC enforcement action.  It is very important for stations to not only conduct a broadcast contest as advertised but to also make sure that their rules are clear and unambiguous, the location of those rules are advertised on the air, and all persons involved in the conduct of the contest (from those on-air employees talking about the contest to those back-office employees who are responsible for the fulfillment of any prize obligations) must be very familiar with all terms of the contest and must observe them to the letter.  As last week’s decision shows, the FCC is ready to fine broadcasters who do not observe all rules for their contests, and it will construe any ambiguity in any set of rules against the broadcaster.  Contests are an important part of the fun of broadcast radio, but they must be done right.